You may have been recently thinking about how much your property is worth on the…
One of the many wonderful parts about owning your own home is that you have the option to tailor your property to suit your taste and lifestyle through renovating. When it is done well, a renovation can potentially add a lot of value to your existing property, not to mention improve your lifestyle too. So, how can you get a loan for renovations?
While renovations are a desirable way to add value to a home, they are not inexpensive. Construction costs and the price of materials has sky rocketed, meaning there may be a need to seek finance for your upcoming renovation job. There are many different options for funding your next project, which can be anything from an extension of your mortgage right up to a personal loan. Let’s take a look at the ways you can turn your renovation dreams into a reality!
Pay your own way – through savings, redraw of offset
You do not need to automatically turn to finance when you are considering a renovation. Perhaps you already have a savings account, or funds that have been accruing in your offset account or redraw facility inside your existing home loan. If you are keen to avoid taking on extra debt, this may be a good option. It is much more simple than adding an extra loan to your responsibilities and you can avoid the extra stress, interest and overall financial risk as a result.
If you are using your own savings, ensure you have enough left over for emergencies and other unexpected expenses such as car repairs or insurances excesses. Often, draining your savings dry can be as financially risky as taking on another loan, so ensure you keep your savings in check and topped up along the way.
If you choose to access the money in your offset or redraw account, speak to your mortgage broker or lender to find out how the life of your loan may be affected. Any money saved in your offset account reduces your interest payable on your home loan and even the life of your loan, so get the right advice to ensure this is the best option for your situation.
Need advice? Get in touch for an obligation-free discussion about your renovation dreams, call 02 4018 7505.
Refinance your home loan
Perhaps you have a decent amount of equity built up in your home. If this is the case, you might want to consider refinancing to fund your renovation. Your equity in your home is the difference between how much your home is worth on the market, and how much you currently owe on your home loan. You may be able to leverage this to borrow more to complete your renovation. During this time you can choose to negotiate your current home loan or find another lender with a better rate or loan product. Be aware when refinancing that fees and charges may be applied and obviously the life of your loan may be affected.
When refinancing, you may want to think about placing your renovation funds in a 100% offset account if possible. In doing this, you may be able to avoid paying any interest on the extra amount until you actually need to use it. You could also consider a line of credit home loan, which allows to use the extra funds when you need them. The interest is charged on the balance owing only.
“I have experienced this process and need to leverage of the value of the home to improve its value. We accessed available to do bathroom and kitchen renovations. We are so glad we did as we enjoyed the new additions to the home and the benefit of improving the value of the property for the future. I would be glad to assist you if you’re looking to do more with your home”. Nestor Ramirez, Senior Mortgage Broker.
Maybe your renovation is a big one, involving a knock down and rebuild, or perhaps an extension to your existing home. Construction loans are usually estimated according to the final post renovation value of your home. This type of loan allows you to withdraw whatever amount you need to get the job done and can sometimes be interest only at first, and then later change to principal and interest later. To have a construction loan, you could apply for it separate to your existing loan as a type of second mortgage, or you could refinance your current mortgage to be a construction loan. Speak to your mortgage broker to see if a loan like this would best suit your situation.
Perhaps your renovation is smaller in scale and cost. A personal loan usually allows you to borrow up to about $50,000-$75,000 and you can choose between a secured or unsecured loan. A secured loan is usually less expensive than an unsecured loan. Interest rates on personal loans can vary greatly and are usually much higher than that of a home loan.
At Watson Mortgages, our mortgage brokers can show you the best possible interest rate for property development and renovation finance. With a panel of more than 20 lenders to choose from and close partnerships with local financial planners, lawyers and bankers, we will find a flexible construction loan or renovation loan to suit your needs.
Let’s talk about getting you those renovation funds!
We’ll provide an obligation-free consultation and help realise the potential for your future home. Call our office to make an appointment today on 02 4018 7505.
Disclaimer: The information provided in this fact sheet is not legal, taxation or financial planning advice. It has been prepared without considering your specific needs, objectives and personal financial situation. Before acting on this information, we recommend that you consider carefully if it is appropriate for your needs, objectives and personal financial situation. All loan products are subject to lender criteria and approval. Fees, terms and conditions apply. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Licensing Statement: Watson Mortgages Pty Ltd Credit Representative 525053 is authorised under Australian Credit Licence 389328.