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How to financially prepare yourself for home renovation

If you have been planning a home renovation over the past few years, now is the time to do it. House prices have remained largely stagnant since 2010, borrowing for mortgages has almost completely dried up, particularly for first-time buyers but there are signs of improvement in 2013. The Bank of England is more optimistic about next year, as are banks and lenders. Inflation should start to level off at the end of the year and lending should become easier. House prices also look set to rise next year. This is good news is you want to sell. Use this final 12 months strategically; a home renovation could significantly increase the value of your property and help you make a tidy profit when the market picks up next year.

Here are some practical tips to financially prepare you for a home renovation:

Take out a short-term fixed rate loan. This time next year the Bank of England’s base interest rate could rise. It is currently just 0.5% and this is helping banks lend at a reasonable level. If you can lock in this rate for 12 months you’re sailing. To get a loan, lenders will carry out a credit check. They do this to make sure you will be able to pay back the loan. Before you use valuable time applying for a loan get a free credit check online to make sure a) your credit report is correct and b) that you are able to get the loan you want. Remember than any loan refusals are noted on your credit history. Credit Expert offers a free credit check online so you can go to your lender prepared without any cost to you.

Save up a contingency. How many times have you watched Grand Designs or Property Ladder and seen couples completely lacking a contingency fund? It is not uncommon. As soon as you decide to go for a home renovation, start putting money aside in a contingency fund. To make this money go further put it in an instant access savings account.

Draw up a detailed budget. This sounds obvious, but so many people don’t bother to draw up a detailed budget; instead they have a ballpark figure they want to aim for – usually all they can afford – and have no idea if its even possible to complete the work on that budget. Do your research; find out how much materials cost and get lots of quotes for labour. Break down your budget into sections so if you go over in one area you can make cut backs in another.

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