Are home improvement loans a good idea?

No matter when you turn on the TV; it isn't long before Lawrence Llewelyn-Bowen or Handy Andy makes an appearance. Home improvements are fast becoming something of a national obsession, but what the makeover programs don't tell you is the best way to raise finances.

Your home is likely to be the largest single investment in your lifetime, so why not make it work for you? There are a number of ‘tried and tested' ways of increasing the value of your property, from converting the loft to building a conservatory. Even less ambitious projects, such as installing a new kitchen or bathroom, can add significant value to your property.

There are a number of options open to homeowners looking to raise capital. The current buoyancy of the economy means low interest rates; and many homeowners automatically assume that remortgaging is the most financially shrewd solution. It may well be, but it's important to bear a few points in mind:

The first thing is to establish whether you have enough equity in your property to fund the planned improvements. If you can't raise enough capital with a remortgage; you may have better luck with a secured loan. Homeowners with a good credit history can get up to 125% of the equity with a secured loan.

When working through the sums it's important to include any early mortgage redemption penalties and the costs of arranging a new mortgage. Figures vary greatly, but you could be looking at anything up to £3,000. This needs to be balanced against the higher APR of a secured loan.

Remember that with a mortgage you're likely to be tied to the debt for a minimum of 10 years. Mortgage terms typically range between 10-25 years, whereas you can schedule secured loan repayments from three years upwards.

Secured loans are generally much quicker and easier to arrange than another mortgage; although this shouldn't affect your financial decision-making.

Before you make any commitments; it's important to do as much homework as possible. The financial marketplace is a fast-changing environment with new products appearing overnight (it might even be worth looking at an unsecured loan). If you still haven't come to a decision; think about consulting an Independent Financial Advisor.