Getting a loan to improve your property

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Getting a loan to improve your property

Owning your own property is a dream which everyone has had in their lives. To be able to call someplace they live home.

The reality is that as property prices continue either to increase or remain at their current all-time highs this is a dream that many cannot afford to realise.

Buying property, regardless if it is a house or a flat is going to be one of the most expensive purchases which we will ever make in our lives. Even more expensive if you are looking at buying someplace to call home in towns like London.

Most of us do not have a few hundred thousand pounds laying around in our bank accounts to buy a property out right. It is challenging enough to save up for a deposit especially if we are also having to pay rent each month. Along with all of the other living expenses, we’d be lucky to have a few hundred pounds left over each month.

If you do have enough to put down a deposit for a property, the remaining balance can be paid via a loan you get from a bank or mortgage lender.

Just like taking out a short-term payday loan the banks will examine your credit score and look at your financial situation to check whether you can afford to repay the mortgage. They will want to see how much you earn and also if you are purchasing the property with your partner how much they earn.

Before you approach the banks you will need to take a good look at your monthly expenses and work out if you can comfortably afford the repayments or if you need to start cutting back on certain expenses such as gym memberships, downgrade mobile phone contracts. The important point here is to demonstrate to the mortgage lender that you are capable of repaying the mortgage.

Once you have all your finances in order you can approach the bank for a loan. They will perform their own affordability checks but ultimately getting a mortgage once you have all the numbers correct is not too difficult.

Provided you have the following in place

  1. You have the correct amount for the deposit
  2. You can show that you can repay the mortgage each month
  3. You have a good credit history.

The first two points are easier to achieve than the 3rd. If you have had problems in the past with repaying loans, then it may show up on your credit report.

We recommend that you plan well in advance before you purchase your property. Around 1 year to start making corrections to your credit score.

Taking out small amounts of credit can really help, such as applying for credit cards, using them and repaying the balance at the end of each month in full, or take out small payday loans and repaying them in full could help to improve your credit scores.

You are now a property giant

Congratulations, you are now the proud owner of your very own property. Owning your own home comes with its own set of responsibilities that you would not have had to worry about if you were a tenant or living at home with your parents.

Now you are responsible for the maintenance and upkeep of the property. For example, who is going to mow the lawn and keep the garden tidy? Are you green fingered? You will have to purchase garden tools, like lawn mowers, hedge trimmers and such like, you may need another loan to purchase these items.

What about when the house needs maintenance, like the boiler breaks down, or the washing machines start to leak, again this is now your responsibility no more picking up the phone and calling the landlord to come with their box of tools to start tinkering. If you don’t have the funds to pay for someone to come and repair the boiler, then you might consider a short-term loan to cover the costs.

Repairing the boiler or mowing the lawn are small expenses compared to the big ones like having to have the roof repaired or the double glazing replaced.

As you can see that owning your own home is never going to be cheap. Property needs to always be maintained just like anything else, like maintaining your car, or going down the gym.

Fortunately, there is a solution and that is called equity. Equity is the value of the property holds as prices of the surrounding properties increases. This price increase means that your property is now worth more than the price you paid for it.

This difference is your buy price and the current price or also called equity can be accessed by you in the form of equity release.

Over time as you pay down the mortgage the difference in the amount owed on the mortgage and the current price market price of the property becomes wider and therefore more equity the property can release.

Releasing the equity in your home could be in the tens of hundreds of thousands of pounds that you could use for the following:

  1. Home improvements
  2. Start a business
  3. Use a deposit to purchase another property to rent

A lot of people who bought their homes in the 1970’s or 1980’s are sitting on a huge amount of equity which they plan to use as their retirement fund by selling up and downsizing their properties to someplace less expensive in a small rural town maybe.

Look after your property and it will look after you

Your property will increase in value provided you maintain it correctly. A leaking roof must be fixed immediately and never be allowed to grow out of control. Water damage to a property is after fire one of the worst things that can happen to your home.

As the years go by things just get worn out, like your once cherished kitchen units or that fantastic bath suite which is now starting to show its age.

You can avoid the kitchen units from getting worn out by making sure the cupboard doors are always fitted correctly and oiled. The Washing machine filters are cleaned, and you use the correct detergents when wash to avoid the build up of lime scale.

You will want to keep your bathroom clean and ensure that the room is correctly ventilated to stop the build-up of mould.

Maintenance does not need to cost much money, but it does require you to stay on top of things. Do a little but often is generally the best policy so jobs do not become overwhelming.

Although if you want to increase the value of your home you could consider the following:

  1. Rear extension
  2. Loft conversion
  3. Convert garage into living area
  4. Conservatory

Nothing adds value to a property than more living space. If you can add more space to the downstairs living area or better still add an additional bedroom and/or bathroom then you can instantly add value.

Speak to a builder and ask them to quote you for the work to have an extension built. Then speak to the local estate agents and find out how much your property would be worth with the extension or loft conversion, compare it to other properties in the area. Simple math would dictate that if the increase in the value of the house is more than the cost of the work buy a considerable margin then if might be worth doing.

Once the work is done you could sell the property, move into a smaller property near by and repeat. This might become your career; many people have gotten into property development this way.

This is all very well and good but where do we get the money to do this?

  1. Equity release.
  2. Sell your car
  3. Save up
  4. Borrow money on an unsecured loan.

You could simply go to the bank and borrow the equity in your property. Tell them your plans to extend the property. Don’t necessarily tell them that you are going to sell it afterward.

If you have a car which you own, you could consider selling it to raise a few thousand pounds, depending on the value of the car, alternatively you could take out a logbook loan.

Start saving up once again. Take on a second job if you have to, you don’t need to save up the entire amount for the conversion or extension but the more you have saved up the less you may need to borrow.

Or you could take out an unsecured personal loan. We would not recommend a short-term loan or payday loan to finance a loft conversion.

Be sure that your calculations are correct and that you can afford to repay the loan. If your plan is to sell the property once the works are complete you will want to check that the loan can be paid in full without incurring penalties or at least no huge penalties.

Keeping an eye on your credit scores.

Keep an eye on your credit score. This is one of the most important elements when applying for a loan along with your deposit and affordability checks.

You may want to go to a credit checking agency like Experian to see your credit score and then if it needs work you can make efforts to improve your score, which in practice is not too hard to do, just requires a little bit of time.

It is quite easy to improve your credit score by doing the following:

  1. Cancel any unused credit cards
  2. Pay off any outstanding credit card balances
  3. Close any unused bank accounts
  4. Pay off an overdraft
  5. Get onto the electoral register

The steps above are not exhaustive but they are key to improving your credit score. If you can’t payoff all the credit card bills or overdraft in one go, then you might consider a debt consolidation loan to pay off all the outstanding bills. Having only one loan to repay makes managing your finances much easier.

It can take up to six months for your efforts to be reflected on your credit score. In that time, you are researching the best builders, saving up, working to bring in as much money as you can to finance the works.

Once your credit score has improved enough for you to take out a loan you will have all the facts in place to make the best choices.

1. Logbook loans are a form of credit secured against your car. You keep using the car but if you miss repayments the lender could seize your cars since it was used as security against the loan.

2. Payday loans are small short-term loans that are generally paid back within 30 day of receiving the loan. So payday loans would not be ideal in this instance

3. Short-term loans are like payday loans, for larger amounts of money and are generally repaid over the course of between 3 and 12 months.

4. Guarantor loans are loans which someone else that you know, and they trust you who will act as the guarantor to the loan. Meaning that if you do not repay the loan, they will have to repay the loan on your behalf. You could consider a guarantor loan as the value of the loan can be up to £8,000 to £10,000 and repayable over the course of a few years.

5. Equity release loan is probably the best option if you intend to release a large amount of capital to finance the loft conversion or loft extension. These projects can run into the ten of thousands of pounds and many months to complete.

Once the work is complete you can then put the property on the market and profit from the work carried out. It is advisable to put the property on the market once the work has been completed.

Once other point to make clear is to use certified builders who may be able to provide a guarantee to the work. Buyers will appreciate it and will give them peace of mind that they are covered by it.

Many people in the U.K struggle with debts and many do not know how to start to repay them speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.

https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk

You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk