Loft conversions are becoming increasingly popular both as a way of creating additional space and increasing your property's value. Converting your loft is often cheaper than moving to a larger home, so it makes sense that this is the route that more and more people are taking. With that being said, loft conversion projects aren't cheap. On average, you can expect to pay anywhere between £15,000 and £80,000, depending on the size and complexity of the conversion. Securing the funds for this can sometimes be challenging, but you do have quite a few options to finance loft conversions.
If you have the cash reserves available to fund a loft conversion project, then this is usually the best option. The money will be readily available as soon as you and your loft conversion company are ready to start work on the project.
By using your savings, you won't have a debt that needs to be paid back. This means that even if your financial circumstances change, you won't have to worry about meeting the repayments.
Whenever you borrow money, you will need to pay interest. This means that you will always end up spending more than if you used cash. Paying for a loft conversion project with your savings instead will always be cheaper.
If you don't have enough money in your savings, then this can complicate things. It can be sensible to diligently save and put money aside to fund the project, but this can take a long time. However, the wait can give you a chance to make decisions about the loft conversion, which can leave you with a better outcome.
But if you are itching to get going with the project, then borrowing the money can get the ball rolling much more quickly.
An unsecured loan is also known as a personal loan. With this type of loan, you are borrowing money from a bank or other lender. You agree to make monthly repayments until you have paid back the amount in full, along with any interest accrued.
An unsecured loan is so-named because it isn't secured to any collateral. This means that the lender isn't relying on your assets as security. Instead, they are relying on your creditworthiness.
For these reasons, unsecured loans aren't an option for people with a low credit score. They can also be difficult to obtain for people with little credit history and for self-employed people without enough years of accounting books to back up their income.
Because this type of loan doesn't use your assets as collateral, you won't lose them if you fail to make repayments. Instead, your credit score will be negatively affected and, in the worst case, you would be taken to civil court for the lender to recoup their money.
Because they are riskier for the lender, unsecured loans will often have quite high-interest rates. This will mean that you will end up paying more money because the loan will accrue more interest each month than other options.
This type of loan will also be a shorter term than other options (often 1-5 years), which again will mean that the monthly repayments would be higher. The terms of the loan are often quite inflexible so you may not be able to renegotiate if you need to.
The amount that you can borrow is usually smaller than for other types of lending options, so an unsecured loan is often only enough to fund part of the loft conversion costs or for smaller projects.
A secured loan is secured against an asset, usually your home. Because of this, it is also known as a homeowner's loan. This means that if you fail to make your repayments, the bank or lender can take the asset to make their money back.
Secured loans can be easier to get for people who have a lower credit score, little credit history, or are self-employed. And because they are less risky for the lender, the interest rates are usually lower than for unsecured personal loans. This will lower your monthly repayments and mean that you will pay less back overall.
You will often be able to borrow a larger amount with a secured loan than an unsecured one and you may be able to borrow the money over a longer term. So your monthly payments will be lower.
Many lenders advertise loft conversion loans. These can be either unsecured or secured loans, with all of the same pros and cons of each. Although the application process can be quicker and easier because of the specialised nature of the loan/lending company.
With that being said, if you can get a better deal with a company that doesn't offer specific loft conversion loans, it can be better to choose that option. The fundamentals of lending are no different for a loan that is branded a "loft conversion loan" than they are for any other type of loan. So a loan with a lower APR, a longer term, and more flexibility will always be the more sensible choice.
If you need loft conversion finance for a large extension or conversion project, then a remortgage can be a good option. You can usually access a lot more funds from a remortgage than you would be able to from a standard loan. And you can borrow them for a longer period.
There are three options for remortgaging to pay for home improvements, such as a loft conversion:
The two options that involve ending your current mortgage and starting a new one can mean that you will need to pay. This is because there is usually an early repayment fee and by ending your mortgage early, you will be liable for that. The fee is usually between 1% and 5% of your current balance. Your broker may be able to find you a good deal that offsets these costs. And if you have come to the end of your mortgage term, you won't need to pay any early repayment fees anyway.
Your credit history and affordability will be assessed just as they were when you first applied for the mortgage. So if your financial situation has changed for the worse, you may be denied the remortgage or only be able to access a mortgage at a higher interest rate. Improving your credit rating before applying can be a good idea in this situation.
With that being said, remortgaging rather than applying for a home improvement loan can save you money in the short term. This is because you will usually be able to access much lower interest rates so your monthly payments will be lower. Because the loan is over a much longer period than a personal loan, then you will usually pay more overall because you will be charged interest for every month of that period.
You will often have to increase the length of your mortgage term to accommodate the extra money you are borrowing. And if you don't have a lot of equity in your home, you may not be able to get as good a deal as you did with your original mortgage so you could see higher interest rates.
Loft conversions can vary depending on a wide range of factors. These include the type of loft conversion you are constructing, the condition and type of property you have, whether you need to apply for planning permission, and how much of your roof space and internal property need to be altered to meet building regulations. The average cost for a loft conversion is between £15,000 and £80,000.
For example, a simple roof light loft conversion that makes no changes to the existing loft space will usually cost between £15,000 and £30,000. Whereas a mansard conversion or loft extension, which requires extensive changes to the existing roof and will require planning permission can cost between £45,000 and £70,000.
When you are looking for a loan for loft conversion financing, you will need to figure out how much money you are going to need to borrow to fund the project.
Discover more: How Much Does A Loft Conversion Cost
Before deciding on how to raise the funds for your loft conversion, you should first get in touch with a loft conversion company to decide on the type of conversion and the scale of the project.
Getting a loft conversion cheaper isn't always the best option. A more extensive loft conversion will cost more money upfront but it will leave you with much more usable space and can add more value to your property. So it is often worth the money. The average value added to a property from a loft conversion is 15%. This can add up to a lot more money than it would cost to construct the conversion.
The type of loft conversion you can construct will also depend on the property itself and this will need to be assessed by the experts. They will also consider whether or not you will need planning permission or other bureaucratic processes that could add to the costs.
Explore in-depth: Do You Need Planning Permission For Loft Conversions
Once you have a detailed quote of how much the loft extension or conversion project is going to cost, you can examine how to access funding.
The cost of the project will often determine what types of funding you can use. For smaller projects, you could opt for an unsecured loan or you may have enough in savings to easily cover it.
For larger projects, you may be looking at a remortgage or a secured loan.
Before applying for loft conversion finance, it is always a good idea to get multiple quotes from different lenders. It can also be a good idea to get help from a qualified financial advisor who can help you find the best deals and who you know will have your best interests in mind.
If you need to know how much your loft conversion is likely to cost so that you can figure out your loft conversion finance, the Loft Crew can help. Our design experts will work closely with you to come up with a loft conversion that fits your preferences and budget and that works well with your property. Then we will provide you with a clear and detailed quote of the predicted loft conversion costs so you can decide how best to finance the project.
An attic conversion involves transforming an unused space into a whole new room and living space. This could be a games room, playroom, home office, or bedroom with en suite. By adding this additional room, your property value will also increase. Loft conversion projects can be expensive but there are several ways that they can be financed. A loft conversion loan (unsecured or secured) or a remortgage are both popular options that can work better for people in different circumstances. But if you have enough savings to cover the loft conversion cost, this would work out cheaper in the long run than loft conversion funding that requires you to get into debt.
