Can I get finance for a loft conversion?
Loft conversions are not a cheap project, however, they can add a real uplift to the value of your home as well as opening up accommodation that has previously been redundant and unused. Financial institutions estimate that a good loft conversion will add between 20% and 25% to the value of your house and so it can be worth making the effort to finance such a big project as you will feel the immediate benefit of the extra accommodation plus the higher sale price when you go to market. So, what are the options to finance a loft conversion?
- Home Improvement Loan – also called a Further Advance, this is additional funding obtained from the current mortgage company based on the existing equity in the property. It is not usually possible to obtain funds on the basis that the work will add a significant uplift, the equity must already be present for the lender to consider the proposal. The homeowner also has to satisfy the lender’s affordability criteria so their income must demonstrate that they can meet the new monthly payments. The Further Advance is usually spread over the remaining mortgage term and has the advantage of lower monthly payments compared to other forms of finance but it will end up costing you more in the long term
- Remortgaging – some homeowners will move to a different mortgage company because they can get a better interest rate or deal; this is often the prompt to raise additional funds from the new lender for home improvement projects. However, if you break contract early with your current lender then you could find yourself facing hefty early redemption penalties and these could really take the shine off extra borrowing to fund a loft conversion
- Equity Release – this is available for older people who have paid off their mortgage and who are looking to use their home to raise funds for capital projects which don’t even have to be related to home improvements
- Loft conversion finance – some loft conversions companies will offer loft finance through a third-party organisation a bit like the type of finance used to buy a car, a three-piece suite or white goods. If the finance is approved then you can push on with your loft conversion project without having to find a large capital sum or go through the process of valuing your property and assessing your affordability both of which your mortgage lender will require. The monthly payments and the interest rate they attract may be higher than those offered by a mortgage lender but you will usually get rid of the loan much more quickly and save yourself money in the long term compared to obtaining the funds from your mortgage lender
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What are the other financial advantages of a loft conversion?
Apart from the obvious uplift in the value of your property, a loft conversion will give you the extra space that can avoid a costly house move. There is a lot of dead money with a house move, expenses that don’t add any value to the end game and this includes estate agents fees, stamp duty and removal costs. These can all add up to several thousand pounds and is just the price you pay for moving house. If you have spent years lavishing money and attention on your current home then why move? A loft conversion can provide the extra space you need and all the money you spend will directly improve not only the quality of your life but also the value of your home.
A loft conversion is cheaper than an extension
A loft conversion is usually cheaper than an extension so pound for pound can represent better value for money than building out to the rear or side of your property. That is because the structure is already there and in place, there is no new build required, just a conversion of an existing part of your home and, depending on the style of loft conversion you choose, this can be significantly cheaper than a new build extension.
Don’t be put off by the cost
The average cost of a loft conversion in London is between £35,000 and £40,000 which sounds a fortune but why not tot up the costs of moving house and compare them? The actual expenses could come in at between £10,000 and £20,000 and that is just the price you pay for moving, this is not money you will see any return on.
If your budget is too high then there are ways you can reduce the cost of the project and still have a loft conversion. A simple roofline Velux loft conversion cost can be as little as £15,000. Change the windows you are having, either the style or the number of both. Don’t fit out a new bathroom or kitchen in the loft, use the accommodation for something else. Fitting new kitchens and bathrooms have the biggest impact of all on loft conversion costs.
It is worth taking finance out for a loft conversion as the value it adds to your home makes for a great return plus you get the benefit of the extra accommodation whilst you are living there. The type of finance that is best will depend upon your personal financial situation, your current mortgage status and how long you intend to live in the property. If you are planning to go to market once the conversion is finished then it may not matter to you greatly which financial route you choose to fund the work. However, if your intention is to stay in the property over the medium to longer-term then it is important to choose the right finance package for your household budget and level of income. A loft conversion is one of the best ways to add value to your home and create some much needed extra space so consider it money well spent.
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1. Tell us some details of your existing loft
Tell us the details of your existing loft and how you would like the loft converted.
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