Home Improvement Loans: Personal Loan vs Mortgage Top-up

1. Home Improvement Loans for Your Renovation and Extension Plans

If home improvements are already on your new year’s resolution list, read on. Is it that new kitchen, extra bedroom or conservatory? Renovations can be stressful but getting the finance doesn’t have to be. The first place to start would be to get an idea of how and what finances are available to you and at what cost, i.e. home improvement loans.

The most common routes to home improvement financing include housing grants, personal bank loans, credit union loans, remortgage with a mortgage provider. If you cannot qualify for a home improvement grant, generally a top-up of your existing mortgage may work out as the cheapest option. Home improvements can potentially cost you nothing if you play your cards right.


2. Home Improvements Grants and Schemes

The SEAI (Sustainable Energy Authority of Ireland) is trying to play its part in helping Irish households become more environmentally sustainable. There are various grants available to homeowners, so it might be worth your time to explore the various options. There are numerous conditions to qualify for each grant, but it might be worth it.

Some home improvements which may qualify you for a grant are listed below:

Insulation (30% of a home’s heat is lost through poorly insulated walls)

  • Solar Thermal
  • Building Energy Rating (BER)
  • Heat Pump System
  • Heating Controls
  • Solar water heating grant

You can read more on housing grants and schemes on the following link. https://www.citizensinformation.ie/en/housing/housing_grants_and_schemes/


3. Personal or Credit Union Home Improvement Loans

If you have no mortgage on your home, and your home improvements will cost less than €50,000, this may be your only option. Personal bank loans are relatively fast to approve once you have a good credit history. Interest Rates can range between 10-14% per annum for a personal loan depending on the amount and repayment term.

Credit Unions typically change a lot less and may give better repayment conditions. Credit Unions in Ireland cannot exceed 12% APR on personal loans. For credit unions in the Republic of Ireland with a dedicated home improvement loan rate, the average loan rate was 7.7% APR and the lowest rate was 4.33% APR (Irish League of Credit Unions 2018).

If you are looking at doing an extension or big house improvements, you might look into a remortgage as the interest rates will be much lower.


4. Mortgage Top-up from Your Bank

If you are looking for larger loan, a mortgage top-up from your bank may be a fast and easy option. However, this may not always be on offer. Furthermore, you will be assessed similarly to when you first applied for your mortgage. The following factors will be important in your bank’s decision to top up your mortgage:


  1. Your current income and ability to afford increased repayments.
  2. Your credit history and recent borrowings.
  3. The current market value of your property.
  4. Your age and the amount of time you want to borrow for.


For example:

  • Your property today is worth €300,000
  • 85% of the property’s value is €255,000
  • You have €155,000 left on the mortgage
  • The maximum amount you could borrow (release as equity) is €100,000 (that’s €255,000 – €155,000)


5. Mortgage Switcher or Remortgage with Another Lender  

Switching your mortgage to another lender can be a good idea even if you are not doing home improvements. You can lean more about the situations when a mortgage switcher may be beneficial on the following link https://mortgage123.ie/switcher-mortgage/

Switching your mortgage to a new lender can secure a larger mortgage amount, i.e. equity release. Furthermore, the new mortgage may be at a better interest rate, saving you on repayments in the long run and better still there are cash incentives available from lenders as a thank you for switching.


6. What is the Best Option to Finance Your Home Improvements?

The best option to finance your home improvement will depend on your situation, but speaking to a mortgage advisor from Mortage123 should always be on your list first. A summary of options includes:

  1. Home improvement grant
  2. Mortgage top-up or remortgage with another lender offering a better deal
  3. If you have a mortgage and looking for over €50,000 loan, remortgage might be the cheapest option
  4. If you have no mortgage or looking for a small loan, i.e. under €20,000, Credit Union personal loan.
  5. Personal bank loan – If you have no mortgage, not a member of a Credit Union and looking for a small loan.

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