Should I take out a personal loan to fund work on my house?

Q I am thinking of taking out a personal loan in order to do some alterations to my house, and I wondered if you could tell me where I could find the best deal. I'm having the building work done by a professional so it should add to the value of my home.

LS

A Have you thought about using your mortgage to fund the work on your property? You might find that it works out cheaper to take some equity out of your home, because mortgages are always cheaper than loans. This is because the debt is secured against your home, whereas personal loans are known as unsecured. The downside of remortgaging is that your home could be repossessed if you get into financial problems and can't pay the mortgage, whereas this would not be the case with a personal loan.

It all depends how quickly you need the money and how soon you want to pay off the debt. The most competitive personal loan providers in the market currently charge interest of around 7% to 8%. For example, Nationwide building society is currently offering a loan at 7.5% on sums between ?3,000 and ?25,000 and you have the option to pay it back over one to 25 years. The best mortgage rates may be almost half this rate, but could find yourself paying the debt off over a longer period.

Alternatively, if you are doing up your house for profit and plan to sell it on quickly, then your mortgage is an excellent way to fund the improvements.

Just make sure you draw up a budget and stick to it!