Secured Loans for Home Improvements UK

Using a secured loan for home improvements

Home improvements are one of the most popular reasons UK homeowners take out secured loans. Whether you are planning a kitchen extension, loft conversion, new bathroom, or full renovation, a secured loan provides access to larger sums at lower interest rates than most unsecured borrowing options.

The amounts typically borrowed for home improvements range from £15,000 for a kitchen refit to £50,000–£100,000 for a substantial extension. A single-storey rear extension in the UK costs £30,000–£60,000 on average, while a loft conversion runs £20,000–£50,000 depending on the type and your location.

One of the advantages of borrowing for home improvements is that the work often adds value to your property, effectively offsetting the cost of borrowing. A well-executed extension can add 10–20% to your home's value, while a loft conversion typically adds 15–20%.

How much can you borrow?

The amount you can borrow with a secured loan depends on the equity in your property and your ability to afford the repayments. Most lenders will lend up to 80–85% combined LTV, including your existing mortgage.

For example, if your property is worth £350,000 and your outstanding mortgage is £200,000, you have £150,000 of equity. At 80% combined LTV, you could potentially borrow up to £80,000 as a secured loan (taking total secured borrowing to £280,000).

For smaller improvement projects under £25,000, an unsecured personal loan may be a better option if you have good credit, as it avoids putting your home at risk and typically has no arrangement fees. Above £25,000, secured loans usually offer better value.

Secured loan rates for home improvements

Rates for home improvement secured loans are generally the same as for any other purpose, typically 5–12% APR for borrowers with good credit. The factors that influence your rate include:

• Combined LTV: lower LTV means lower rates
• Credit score: cleaner credit history qualifies you for better pricing
• Loan amount: some lenders offer better rates for larger loans
• Term length: the repayment period can affect the rate offered

As an illustration, a £40,000 secured loan at 7% over 15 years would cost approximately £360 per month, with total interest of £24,720. The same amount at 7% over 10 years costs £465 per month but only £15,740 in total interest — a saving of nearly £9,000.

Secured loan vs other ways to fund improvements

A secured loan is just one of several ways to fund home improvements. Here is how the main options compare:

• Remortgage: if your current mortgage deal is ending, remortgaging to release equity often offers the lowest rate. However, you will pay arrangement fees and may face higher rates on the entire mortgage balance if rates have risen
• Further advance: your existing mortgage lender may offer additional borrowing. Rates vary, and the extra amount is added to your first mortgage
• Unsecured personal loan: for projects under £25,000, a personal loan avoids using your home as security. Rates for good credit borrowers are typically 3–7% APR
• Credit card at 0%: for smaller projects, a 0% purchase card can provide interest-free funding for 12–24 months
• Savings: the cheapest option if you have the cash available, as you avoid all interest charges

A secured loan is particularly useful when your first mortgage has a competitive rate with high ERCs, making remortgaging expensive, or when you need to borrow more than £25,000 and unsecured lending is insufficient.

Planning your improvement project

Before applying for a secured loan, get detailed quotes from at least three builders or contractors. Include a contingency of 10–15% in your budget for unexpected costs — renovation projects almost always reveal surprises once work begins.

Consider whether you need planning permission for your project. Many improvements fall under permitted development rights, but extensions that exceed certain size limits, work on listed buildings, or properties in conservation areas may require formal planning consent.

Check whether your project requires building regulations approval, which is separate from planning permission and applies to most structural work, electrical installations, and plumbing changes. Non-compliance can cause problems when you come to sell.

Tax implications of home improvements

Home improvements do not attract any tax relief for your main residence. However, the money spent on improvements does reduce your capital gains tax (CGT) liability if you ever sell the property and it is not your main home. Improvement costs (but not repair or maintenance costs) can be deducted from any gain.

If you are a landlord improving a rental property, the situation is different. Improvements (as opposed to like-for-like repairs) are capital expenditure and cannot be deducted from rental income, but they do reduce your CGT liability when the property is sold.

Get expert help funding your home improvements

A specialist broker can compare secured loans, remortgage options, and further advances to find the most cost-effective way to fund your project. They will factor in your current mortgage terms, ERCs, and the total cost of each option over the full term. Find a specialist secured loan broker through Nesto — matching is free and takes under two minutes.