Our home gives us space, warmth and memories. As years pass, our needs change due to family growth or lifestyle wishes. Storage may need additions with more members at home. Hobbies picked up may require dedicated rooms, too. Health issues could also make different arrangements more comfortable over time.
Upgrades and additions help shape houses into our dream homes. But big improvements often involve high costs. Special loans that use the house as security can make major works affordable.
Big changes to our living spaces often need large amounts of money. Saving up enough can take years. Meanwhile, we compromise on convenience and comfort at home. Secured home improvement loans are an option to access bigger money faster. These loans allow borrowing 2-3 times your income, thanks to lower risk for lenders.
Who Qualifies for Home Improvement Loans?
Some rules apply for loans against house value, too. But these rules are less strict than other loans, thanks to lower lender risk. Property merits matter more than personal credentials here.
Borrower Profile Musts
The minimum age for single applicants is 18. The maximum age can reach 70-75 for working people and 65 for retired folks. Non-resident citizens also qualify based on visa status. Adding a co-applicant boosts eligibility.
Income Proof Needed
Steady income flow to cover existing costs and new loan instalments is a must. So, recent salary slips or bank reports are checked. Self-employed have to share tax returns and business finances. But no fixed income level – flexibility exists case-by-case.
Past Repayment Problems
A good credit score means better interest and terms. However, direct lender loans for bad credit can also be approved if more house value shares can be kept as a safety buffer. Past defaults or bankruptcy may require a 1-2 year gap post-problem resolution. Customised assessment happens on the basis of a full application appeal.
The existing property price decides the maximum loan amount. So, the minimum percentage to retain as equity also applies – usually 25-40%. Authorised property assessors verify exact worth through site visits. Higher equity retained promises more attractive overall terms from lenders. Surplus inheritances invested earlier in the house also enable larger loans.
Loan Size Compared to Home Value
Loan-to-value or LTV tells how much of the total house price makes up the loan.
For example, if current home worth is £200,000, and the lender offers a loan of £150,000, then LTV is 75%. This means the house owner keeps 25% of value i.e. £50,000 as cushion spare equity.
LTV depends on the lender’s risk-taking ability. A high LTV above 75-80% means the borrower keeps very little spare value if unable to repay, so terms are less attractive. A low LTV of 40-50% means the owner holds a larger equity cushion. Hence, lenders offer better rates and overall deals.
Impacts on Loan Amount Availability
Clearly, the higher the LTV ratio, the larger the loan amount approved. So, people with small or no savings can still undertake home upgrades by keeping lower equity shares at 20-30%.
This allows homeowners to use a large portion of their house value tied up. Those with surplus savings can retain 50-60% as cushion equity and still take considerable loans at great rates.
Type of Homes Considered
Lenders accept stand-alone, twin, and terraced houses under sole ownership titles. Leasehold homes can also qualify if the lease length exceeds the repayment period. Rural locations need extra checking. Ready-to-move-in status is preferred.
Current occupancy state, structural soundness, and property market appeal also affect value. The costs of needed repairs will be adjusted while estimating the highest possible loan amount.
Commercial or farmland does not qualify. Part-business usage may be fine if the majority of the area is used for living. Second homes and rented houses do meet the criteria, although some lenders may have limitations.
Getting Home Upgrade Loan Request Ready
When we plan big home repair works, taking a loan against house value pays for it properly. Submitting a full request covering key points is vital to getting a faster nod from the bank on the money needed.
Keep Must Have Papers Ready
Valid ID cards, such as driving permits, passports, and national IDs, and house address proofs, like power bills, show ownership and a stay claim in the house.
One must give correct property papers showing current ownership. If rebuilding or adding rooms, existing building nods from authorities need to be submitted.
Income Proof
Latest salary bank papers, tax fillings, business profit/loss sheets, etc, show regular earning potential to replay new loans. Itemised contractor listings on the cost of each work area should match the loan amount asked. For big structure changes, the intended drawings also go. These help banks check practicality.
Facts on Left Over House Value
Current home loan account statements accurately reveal residual asset value in the house after existing loans, if any. Surplus inherited cash to put into the house must also be shown to establish the potential for new lending within.
Learn the last paid rates in nearby localities for related sized and type houses. This finds a likely current price to determine a viable loan amount for planned repair works.
We must also do background checks and credit score self-assessments beforehand, like banks will do. Any negatives should be fixed with credit agencies fast to reduce risk perception.
Compare interest rates, fee structures, and processing times offered by different lenders. This ensures we apply for the best-suited loan option. Maintain an account with the shortlisted bank for faster approval.
Conclusion
Banks provide some home improvement loans up to £50,000 but require much paperwork. Even family financing may fall short of expensive revamps. Personal loans are capped by amount and have higher interest costs, too.
Special secured lending uses the house itself to promise larger loan amounts at attractive repayment terms. Lower interest applies despite a bad credit history in the past. Some lenders even allow temporary rent for alternate stays during work.
Faster approval with less documentation happens due to the focus on property value more than a credit score or income proof. A bad credit history does not pose big hurdles, although larger equity shares become essential.
A comforting home enables happiness and memories. Using responsible financing to upgrade houses helps make our personal havens much closer to perfect.
Mark Williams works as one of the Loan Advisors at a direct lender firm, Onestoploansolution. He has been working with the lender for about 15 years. He has been known to facilitate his employer in remarkable ways from writing to consulting and whatnot. He is a professional who wants to explore more of the UK financial market, the loan products and how customer requirement changes with time.
