How to finance your garden project

Consumer expert Jennifer Newton advises the best way to borrow money to renovate your garden.

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Homeowner or personal loan?

‘This depends on each homeowner’s credit profile, as many are currently declined for a personal loan due to failing the lender’s ‘credit score’. If this happens, it would be easier to be accepted for a homeowner loan, and, in many cases, when the loan is for £20,000 or more, it will be at a cheaper rate than a personal loan. The loan is secured against your home, making it less risky for the lender, and any amount up to £100,000 is available, with terms up to 25 years. Check your current account provider and comparison sites for deals.’

Why are loans currently great value?

‘During 2013, a number of new lenders entered the market. The result was a “competition war” that provided homeowners with low interest rates starting at 5.59 per cent. This situation is set to continue.’

Is there anything to be wary of?

Homeowner loans have become a very good option, as many people are currently on a low tracker rate or low standard variable rate (SVR) mortgage. If you are, it’s not advisable to remortgage, as you will lose the cheap low rate. With a homeowner loan, there are no upfront costs and early repayment charges are a maximum of one month’s interest, with a month’s notice. To protect borrowers, there are Office of Fair Trading rules, including a 16-day cooling-off period, providing ample time to check the agreement, and a fully transparent broker fee is added to the loan. However, a homeowner loan means your house could be repossessed if you default on the payments.’

Should a mortgage be considered?

 ‘A mortgage should only be looked at if your existing mortgage has no early repayment fees and the new one has a lower interest rate. Also, consider the costs that go with a remortgage, such as product booking fees, valuation fees and legal costs. Those with a low base rate tracker, low SVR or an interest-only mortgage should certainly consider a personal or homeowner loan before remortgaging, to save money long-term.’

In the gallery: image: Gardenpix