The Ultimate Guide to Financing: Home Extensions

The Ultimate Guide to Financing: Home Extensions

Home extensions are a fantastic way to add space, comfort, and value to your property. Whether you’re looking to expand your kitchen, add an extra bedroom, or create a new office space, a home extension can breathe new life into your home. However, the financial side of home extensions can be daunting. How do you fund such a significant project? What are your options, and how do you ensure you’re making the right decision?

In this guide, we’ll explore the different financing options available for home extensions in the UK, the key considerations when planning your project, and how retail finance brokers like Kandoo can help you find the best solution to suit your needs.

Why Consider a Home Extension?

Before diving into the financial aspects, it’s essential to understand why home extensions are such a popular choice among homeowners. Expanding your home offers several benefits:

• Increased Space: Whether your family is growing or you simply need more room for hobbies, work, or leisure, a home extension can provide the additional space you need.
• Added Property Value: A well-executed extension can significantly increase the value of your home, making it a sound investment.
• Avoiding the Hassle of Moving: Moving house can be costly and stressful. A home extension allows you to stay in the location you love while adapting your home to your changing needs.
• Personalisation: An extension allows you to tailor your home to your specific requirements, whether it’s adding a bespoke kitchen, a larger living area, or a new bathroom.

Planning Your Home Extension

Before you start thinking about financing, it’s crucial to plan your extension carefully. A well-thought-out plan will not only help you stay within budget but will also give you a clear idea of what you can achieve with the available space and resources.

1. Set a Realistic Budget

The first step in any home extension project is setting a budget. You’ll need to consider both the cost of construction and additional expenses such as planning permissions, architect fees, and finishing touches like flooring and furniture. On average, a single-storey extension in the UK can cost between £1,500 and £2,500 per square metre, depending on the quality of materials and labour.

It’s also wise to include a contingency fund of around 10-15% of the total cost for any unexpected expenses that may arise during the build.

2. Obtain Planning Permission

Depending on the size and scope of your extension, you may need planning permission from your local authority. Smaller projects may fall under Permitted Development Rights, but larger or more complex builds will likely require formal approval. It’s essential to factor in the cost and time associated with obtaining planning permission when planning your project.

3. Consider the Impact on Your Home’s Value

While a home extension can increase your property’s value, it’s important to ensure that the cost of the extension doesn’t outweigh the potential increase in value. Research similar properties in your area to get an idea of how much value an extension might add. This will help you determine whether the project is financially viable in the long term.

Financing Options for Home Extensions

Now that you’ve planned your extension and set a budget, it’s time to explore your financing options. There are several ways to fund a home extension in the UK, each with its own advantages and considerations.

1. Savings

If you have enough savings to cover the cost of your extension, this is often the simplest and most cost-effective option. Using your own money means you won’t have to worry about interest rates or monthly repayments. However, it’s essential to ensure that you don’t deplete your savings entirely, leaving yourself without an emergency fund for unexpected expenses.

2. Remortgaging

Remortgaging involves switching your current mortgage to a new deal, either with your existing lender or a new one, to release equity from your home. If your property has increased in value since you purchased it, you may be able to borrow more than your current mortgage balance and use the extra funds to finance your extension.

Remortgaging can be a cost-effective way to borrow money, as mortgage interest rates are typically lower than personal loan rates. However, it’s essential to consider the long-term implications of increasing your mortgage debt, as this will likely extend the length of your mortgage and increase your monthly repayments.

3. Home Improvement Loans

A home improvement loan is a type of personal loan specifically designed for property renovations and extensions. These loans are unsecured, meaning you don’t need to use your home as collateral, which can be appealing if you don’t want to risk your property. However, unsecured loans typically come with higher interest rates than secured loans, so it’s important to shop around for the best deal.

Kandoo, a UK-based retail finance broker, can help you compare a range of home improvement loans from various lenders, ensuring you find the most competitive rates and terms for your needs. Kandoo works with a panel of trusted lenders, so you can be confident you’re getting a fair deal.

4. Equity Release

Equity release allows homeowners aged 55 and over to access some of the equity tied up in their property without having to sell or move. This option can provide a lump sum or regular payments, which can be used to fund a home extension. However, equity release can be complex, and it’s essential to seek professional advice to fully understand the long-term impact on your estate and inheritance.

5. Credit Cards

While not the most common option for large projects, some homeowners use credit cards to finance smaller extensions or specific elements of a larger project, such as purchasing materials or paying for labour. If you can secure a credit card with a 0% interest offer on purchases, this can be a cost-effective way to spread the cost of your extension. However, it’s crucial to ensure you can pay off the balance before the interest-free period ends, as credit card interest rates can be high.

6. Government Schemes

In some cases, government schemes may be available to help with the cost of home improvements, particularly if your extension is focused on improving energy efficiency or accessibility. For example, the Green Homes Grant was a government initiative that provided vouchers for energy-efficient home improvements, though this scheme has now ended. Keep an eye on any future schemes that may be introduced to support homeowners with renovation projects.

How Kandoo Can Help

Navigating the various financing options for your home extension can be overwhelming, especially with so many lenders and deals to choose from. This is where a retail finance broker like Kandoo can be invaluable.

Kandoo specialises in helping homeowners find the best financing solutions for their home improvement projects. They work with a panel of trusted UK lenders to offer a wide range of loan options, including personal loans, home improvement loans, and more. By comparing deals from multiple lenders, Kandoo ensures you get the most competitive rates and terms for your specific needs.

The process is simple and straightforward:

1. Apply Online: Start by completing a quick online application. This helps Kandoo assess your financial situation and identify the best loan options for you.
2. Compare Lenders: Kandoo will compare a range of loans from their panel of lenders, presenting you with the most suitable options.
3. Choose the Best Deal: Once you’ve reviewed the available options, you can choose the loan that best fits your needs and budget.
4. Receive Funds: After your loan is approved, the funds will be transferred to your account, allowing you to start your home extension project.

Kandoo’s service is free to use, and they are authorised and regulated by the Financial Conduct Authority (FCA), so you can trust that you’re in safe hands.

Final Thoughts

Financing a home extension is a significant decision, but with careful planning and the right financial solution, it can be a rewarding investment in your property’s future. Whether you choose to use savings, remortgage, or take out a home improvement loan, it’s essential to consider your options carefully and ensure that your chosen method aligns with your long-term financial goals.

For those looking for a simple, transparent way to find the best financing option, Kandoo can help you navigate the process and secure the funds you need to turn your dream extension into a reality. With their expertise and access to a wide range of lenders, Kandoo can take the stress out of financing your home extension, allowing you to focus on the exciting task of creating your new space.

This article provides general information and does not constitute financial advice. Always consult a professional financial advisor before making any major financial decisions.