Renovation Finance
Thinking of giving your home a facelift but worried about the costs involved? Don’t sweat it. We’re here to walk you through five financing options that could make your renovation dreams come true without breaking the bank.
Dive into Your Home’s Equity
One popular way to fund your renovation is through an equity release or top-up loan. This means you borrow against the value of your home as it stands now, before any upgrades. If you own your place, you might be able to borrow up to 80% of its value. For those with a mortgage, you could access funds based on the difference between what you owe and 80% of your home’s value. Just be mindful, if your renovation costs soar beyond your equity, you might find yourself stuck in a bit of a pickle if you need more funds.
Consider a Construction Loan
For those planning major renovations, a construction loan spreads the cost over time. Lenders will look at the projected value of your home post-makeover, and you might get to borrow up to 90% of this future value. The perks? Competitive mortgage rates and staggered payments that match your renovation stages. Just remember, you won’t get the entire loan in one go but in progress payments instead.
Line of Credit: A Flexible Friend
A line of credit offers flexibility, letting you draw funds up to a set limit as needed. You’ll only pay interest on the amount you use. It’s a great tool, but discipline is key. Since you’re only required to pay the interest monthly, without a plan, you won’t chip away at the principal balance. Rates can be higher than other renovation loan options, so plan carefully.
Personal Loans: Quick and Simple
If your renovation is more of a touch-up than a total transformation, a personal loan could be the way to go. Generally capped at around $60,000, these loans are faster to secure but do come with higher interest rates compared to equity or construction loans. They’re a solid choice for smaller projects, just keep an eye on the repayment schedule.
Credit Cards for Minor Makeovers
For very small projects, you might even consider using a credit card. While not ideal due to high-interest rates, for tiny tweaks, the total interest cost could end up being less than the fees for setting up a loan. This option requires discipline and a clear repayment plan to avoid spiralling costs.
The Golden Rule: Add Value
Regardless of the financing route you choose, ensure your renovations will increase your home’s value. Aim for changes that will appeal to potential buyers, ensuring you can sell for more and faster. After all, the best renovations are those that pay for themselves over time.
Embarking on a home renovation journey can be exciting and, with the right financial strategy, entirely achievable. Consider your options carefully, think about the long-term impact on your home’s value, and choose the path that best suits your needs. If have any more questions or you’re ready to take the plunge, give us a call. We’re here to help you through every step of the journey. Happy renovating!
Need some Advice about loans?
A mortgage broker can help you find the right loan and secure the finance that’s most suitable for you. It will also ensure you avoid making mistakes.
Any questions about this blog or questions regarding loans, contact Annette Tothill on 0420 973 551.