Home improvements can transform your living space, increase your property’s value, and sometimes even reduce monthly bills by making your home more energy-efficient. But the big question for many homeowners often is: how and when do I fund these projects?
Let’s explore the best ways to finance home renovations in 2025. From simple cosmetic upgrades, to larger structural changes, we’ll demystify and lay out a range of financing options below.
1. Savings
If you have savings tucked away, using them to fund your home improvements can be the most straightforward and cost-effective option. If they’re available to you, savings won’t incur interest charges, you’ll maintain full control over the budget, and keep collateral risk low.
However, draining your savings might leave you unprepared for unexpected events or expenses. A blended approach could be a wise one, especially if you’re worried about losing access to a rainy day fund.
2. Unlock equity with a HELOC
If you’re planning a sizable renovation (like adding a new kitchen or converting your garage) a HELOC might be your best option. A Selina HELOC <hyperlink>, for example, enables customers to release equity from their property at low interest rates, whilst spreading the cost of the refurbishment over a period that works for them (repayment terms can be agreed between five and 30 years). Customers can draw down, repay and redraw funds as they like, whilst only paying interest on the outstanding balance.
- Pros: higher borrowing limits; longer repayment periods; lower interest rates than unsecured loans. You’ll receive your funds as a line of credit, which means that if your renovations cost more than you first thought, you can simply draw the additional funds from your HELOC. Alternatively, if the renovations cost less than you thought, you won’t pay interest on what you don’t use.
- Cons: you are using your home as collateral, so must keep up with agreed repayments.
3. Home improvement loans: unsecured personal loans
For small scale projects, an unsecured personal loan might make sense. Many UK banks and online lenders offer home improvement loans specifically tailored for such expenses. The loan terms typically range from 1 to 7 years, and you can borrow anywhere from £1,000 to £25,000
For small-scale home improvement projects, an unsecured personal loan can be a practical option. Many UK banks and online lenders offer loans specifically tailored for such expenses, with terms typically ranging from 1 to 7 years. You can generally borrow between £1,000 and £25,000, though some providers may offer higher amounts depending on your financial circumstances.
- Pros: quick access to funds without putting your home at risk; fixed monthly payments make budgeting easier.
- Cons: higher interest rates compared to secured homeowner loans means you may end up paying more over time. This is especially true if you have a bad credit score. You’ll also have to borrow a lump sum, which means you’ll need to have a good idea of all your renovation costs before you apply.
4. Green home grants and energy efficiency schemes
In the UK, the government continues to encourage energy-efficient home improvements through grants and loans. From solar panels to draught-proofing, heat pumps and insulation upgrades, you may be eligible for grants or low-interest loans like HELOCs that could offset the costs of making your home greener.
- Pros: reduced upfront costs for eco-friendly improvements; long-term savings on energy bills.
- Cons: may involve a lengthy application process, and funds can be limited. It’s a good idea to act quickly when schemes become available. The Green Homes Grant scheme is currently closed for applications. *correct as of 19 July 2021
5. Credit cards: for small changes
Credit cards can be a handy way to cover smaller improvements, such as buying a few new items of furniture. Some cards offer 0% interest for an introductory period, making them an appealing option if you can repay the balance within this window.
- Pros: flexible repayment options; potential 0% interest for short-term borrowing.
- Cons: risk of high-interest rates if you don’t pay off the balance before the 0% period ends; not suitable for large purchases.
6. Help from family or friends
Some homeowners prefer borrowing from family or friends. This is often the cheapest form of borrowing if your loved ones are in a position to help, but it’s important to draw up a clear repayment plan to avoid personal fall-out, or any potential tension.
- Pros: interest-free or low-interest loans depending on your situation; may have flexible terms.
- Cons: can strain personal relationships if not managed carefully.
7. Hire purchase or finance plans for new fixtures
Many UK retailers offer hire purchase or finance deals for purchasing high-value items, such as cars, kitchens, bathrooms, or furniture. Many UK retailers offer finance deals for purchasing kitchens, bathrooms, or furniture. These hire purchase agreements are a type of credit agreement that allows you to hire an item and pay for it in instalments over time.
- Pros: interest-free or low-interest deals are often available; spread the cost of expensive items.
- Cons: limited to specific purchases; can be costly if interest is applied after an introductory period. As you don’t actually own the item until the final payment has been made, if you miss a payment the item can be taken away. There may be hidden costs.
Which option is right for you?
Choosing how to fund your home improvements in 2025 depends on several factors:
- Project size: larger projects like extensions may be best paid for with savings or secured loans, while smaller updates might be covered with credit cards.
- Your financial situation: consider your income, credit score, and the potential impact on your monthly budget before deciding. You should factor in whether you’d be happy managing multiple debts, and repayments.
- Interest rates: keep an eye on market trends, as interest rates can fluctuate, impacting the cost of borrowing.
Final tips:
- Plan ahead: always get professional advice, and seek out quotes and estimates early. This will help you work out roughly how much you’ll need to borrow.
- Shop around: don’t settle for the first loan or finance deal you find - compare different lenders and terms.
- Have a contingency fund: always add 10-15% to your budget for unforeseen expenses.
To learn more about how Selina can help improve your personal finances, visit our site to learn more.
