The nine best home improvements

Which home improvements add the most value - and what's the best way to borrow to pay for them?

It's not the easiest time to sell your home as any vendor knows. And with Nationwide reporting today that house prices fell by 0.4% in April -- having now dropped 15% in the last 12 months -- sellers need to do everything they can to make their property stand out from the crowd.

But expensive home improvements can add little value to your property, according to recent research from HSBC, with some projects potentially costing more than the value they add.

The lender commissioned research from valuers across the UK to work out which home improvements are likely to increase your property's value. They also asked which jobs were likely to add no value at all -- and the results are surprising.

Forget the flooring

While plush new carpets might seem like the kind of touch that would attract prospective buyers, in fact 49% of valuers thought it would add no value at all. And the rest thought it would increase your property's value by just £1,273 -- no more than the typical cost of the carpet.

The valuation experts reckon that the two most valuable home improvements you can make are loft conversions, adding an average of £13,567 to your property's value, and room extensions adding £13,285. Of course, in both of these cases the job could cost more than this in some parts of the UK.

New bathrooms are estimated to add over £2,000 to the value of your property and new kitchens over £4,000.  

Below are the most common home improvements and how much the experts think they will add, as well as what percentage thought the work would have no impact on value:

The table shows that while home improvements can add value to your property, it shouldn't be your only or prime motivation for doing them.

Of course many of us make home improvements in order to better enjoy our homes and have every intention of continuing living in the property. In this case, the fact that the work is not a good financial investment may not matter to you so much - it's an investment in your family's quality of life.

So how do you fund major home improvement work? In an ideal world the money would be sitting in your savings account surplus to requirements and itching to be spent. But of course, that not how most of us manage our day-to-day finances and it could be that you need to borrow to improve your living quarters. So where do you start?

Finding funds

If the cost of your home improvements is only a few thousand pounds, the cheapest way to borrow money is via an 0% interest credit card. At the moment, the Virgin Money credit card offers 16 months at 0% interest on balance transfers, and allows you to transfer money directly into your bank account for a 4% fee (watch our Love it or Loathe it? webcast  for more details). 

But some home improvements are much bigger projects and a longer term solution might be in order. If you want to borrow a lot of money and you think you will need a number of years to repay your debt, an unsecured personal loan is the obvious option. They are easily available, the funds are with you in days and the repayment is usually straightforward. You can choose your term and the amount you wish to borrow. Market-leading loan rates currently start at 8% with Alliance & Leicester's personal loan, for example.

Alternatively, you could consider a lifetime balance transfer credit card, where you get a set rate of interest on any balance transferred until that debt is repaid - no matter how long that takes. And the rates are often lower than personal loan rates, starting from 6.8% with Barclay's Simplicity VISA card for example. If you do consider this option though, be aware that if you use your card for any other purpose, negative payment hierarchy could cost you dearly. This cunning credit card con is explained in more detail in Don't fall for this card trick! Lifetime balance transfer cards are best used for that purpose alone and not for making additional purchases.

Big borrowing

However, if you want to embark on a large project, like an extension, loft conversion or conservatory this could cost anything from £7,000 to £50,000. And a personal loan or credit card will not cut it for that type of borrowing.

Remortgaging is one option, and you benefit from the fact that interest is charged at your mortgage rate -- which is usually lower than other forms of borrowing. However it may be difficult to release equity from your home in the current climate. Plus by securing the borrowing against your property, your home is at risk if you cannot meet your repayments.

In addition, by repaying the debt over a long period, you will incur a larger interest bill than on a short-term loan. For more information, read steer clear of secured loans.  

While all types of borrowing should be considered carefully, any borrowing that is secured against your property is a major undertaking and you should understand the long-term costs and charges, and the implications of not meeting your repayments. If you are unsure, it could be worthwhile taking the advice of an independent mortgage broker who will help you choose the best borrowing solution for you.

Compare mortgages, credit cards, current accounts and personal loans at lovemoney.com