At some point, every houseowner wants to brighten up their home and whenthat happens they will find the marketplace crowded with lending products,writes Laura Slattery

It is easy to get tired of staring at the same four walls and the same floral wallpaper that has adorned them since you first moved into your dream home, sometime last century.

Then there are the frayed carpets, the faded curtains, the peeling kitchen linoleum and the fact that, as the kids keep running around crashing into each other, there just does not seem to be enough space any more.

If moving house is not an option, it could be time for some home improvement. And if it is something more dramatic than a DIY fresh coat of paint you have in mind, you will have to consider how you are going to finance this change in scenery before you start collecting colour charts and asking friends to recommend contractors.

Most homeowners will need to borrow to make large-scale improvements and are faced with two basic choices - taking out a personal loan or remortgaging the family home.

Banks will either offer specific home improvement loans or suggest it as a reason for applying for a personal loan, with annual percentage rates usually 9 to 11 per cent. Homeowners who decide to follow the remortgaging route can release equity on their homes and borrow at much lower interest rates than those available for personal loans.

As house values increase over time, the market value of the property could exceed the outstanding mortgage balance. The difference between the two equals the amount of equity that can be tapped into at home-loan rates and paid back over a longer period.

Ms Olive Moran, marketing manager for Bank of Ireland Mortgages, believes there are distinct advantages to taking out an equity-release loan. These can be repaid over between five and 20 years at fixed or variable mortgage rates, with a typical APR of 4.8 per cent.

"If it's a large home improvement, it might be easier to pay it over the full term of the mortgage," she says. "The vast majority of equity-release loans are taken out for this purpose."

Customers can save more than €4,000 on a loan of €25,000 over five years if they opt for an equity-release loan rather than a personal loan, according to Ms Moran.

Customers can borrow up to 90 per cent of the property value under an equity-release loan. The minimum amount that can be borrowed at Bank of Ireland is €6,400, but the average equity-release loan stands some way above this at €51,000.

One factor working against such products is that customers may be afraid that, by paying back small amounts of debt over a longer term, they are accruing a greater amount of interest - even if the loan is at the lower home-loan rate. There will also be legal fees involved in equity-release loans to cover stamp duty and registration of the additional mortgage.

"You need to consider that if you're building an extension, that's a long-term structural project, so you might want to spread out the repayments and make it easier on the pocket," says a spokesman for AIB.

"But if you're painting the house or getting a carpet, it doesn't make sense to finance that over the long-term, especially if you're going to be coming back in a few years to get something else done," he says.

"If you are doing an equity release, you shouldn't do it for a new suite of furniture, you should do it for something that will add value to the home," agrees a spokeswoman for Bank of Ireland.

An attic conversion, for example, could increase the value of a house by as much as €27,000, according to estimates by Myhome.ie. Extensions boost property value by at least €12,000, while a complete bathroom refit could add over €6,000. The same principle of paying back small amounts of debt as quickly as possible applies to personal loans.

At National Irish Bank, a loan of €5,000 can be paid back over a five-year term at a fixed rate of 9.3 per cent APR, but borrowers will ultimately pay less interest if they pay back the same amount over a three-year term at the slightly higher fixed rate of 9.5 per cent APR.

At Bank of Ireland, up to €25,000 can be borrowed under a personal loan at an annual percentage rate (APR) of 10.9 per cent. Loans for home-improvement purposes are available for up to seven years, but repaying a personal loan over this amount of time would be "unusual", says the Bank of Ireland spokeswoman.

"The repayment term shouldn't be longer than the life of the product. Don't repay a washing machine over seven years if it's going to be dead in three," she advises.

Flexible repayment terms can be the key to attracting customers to personal lending products. According to a MORI poll conducted in Britain last year, 55 per cent of people will apply for loans at the bank where they hold their current account.

But Mr Brendan O'Hora, head of marketing at First Active, believes its Utopia product is helping the bank buck that trend.

When Utopia was first introduced, it was simply a way for customers to bring all their debts under one loan at the home-loan rate. "There was some concern that, even though there was the ability to overpay and accelerate repayment, it was perhaps not a good idea to repay, say, a car loan, together with the mortgage over 15 years," Mr O'Hora says.

But under Utopia Split Term Option, introduced in April, customers with mortgages at First Active or who move their mortgages to First Active, can get personal loans from €10,000 up to 80 per cent of the market value of the property at home-loan rates but pay it back over a shorter term than their mortgage.

Existing customers can also apply for a top-up mortgage of €2,500 to €65,000 and choose to pay it back between one and 30 years, with a property valuation of around €75 the only additional cost. Mr O'Hora says around half the personal lending at First Active is connected with home improvement.

If you want to build rooms off rooms, landscape your garden or convert the attic from a dusty storage space to an extra bedroom, the marketplace is crowded with personal lending products to help you finance it.

But it pays to remember that shopping around for the best interest rates is as important as finding the builder with the most competitive quote.