Renovation projects of all sizes can be incredibly demanding on your energy levels – and on your wallet. Fortunately, financing options are available and here’s a closer look at types of loan that may help you to secure the funding that you need.
If you’re thinking about renovating your home to take it from zero to hero, then you might be full of ideas, but a little strapped for cash. That’s why we’ve put together a selection of helpful advice to help you to get your funding taken care of.
It won’t matter if you’re planning on adding a few final touches to you’re the interior of your property with a fresh coat of paint, or if you are keen to completely overhaul the look and feel of your home; we’re sure that you’ll find a solution to meet your requirements below.
Consider Taking out a Home Equity Loan
If you’ve owned your home for a few years now and you’re already repaying your mortgage, then the value of this loan might differ greatly from the current market value. If it does, and the value of your home is higher, then the difference between your mortgage and property value is considered your equity. Most lenders will lend up to 80% of this amount, therefore enabling you to receive extra funding (as long as you can meet your lender’s specifications).
For those of you that are hoping to completely overhaul the entirety of your house, then a traditional homeowner mortgage might be better suited. You may be able to borrow up to 90% of the total cost of your property and take advantage of lower interest rates. In this circumstance, the lender will require documentation of renovation contracts and quotes to support the application.
Take Out a Construction Loan
Construction loans are considered for major renovations or building. These can be construction loans or home loans that have a construction facility. Unlike regular home loans where you typically receive a lump sum of the loan amount at settlement, construction loans are paid out in periodic progress payments from the lender at different stages of construction
Loan repayments are also interest only during the construction period, providing comfort and security to renovators and home builders by minimising their repayments during an expensive, and probably stressful, time.
Establish a Line of Credit
If you don’t mind tackling your renovations as and when the cash is available, then a line of credit might be the way to go. You’ll need to apply for a regular loan, but with the credit line specifications in particular. What this means is that you’ll be provided a total sum, but split into individual credits that you can access when they are needed. As your loan will then be repaid in batches, the only thing that you’ll need to do is keep on top of each payment to access the next sum to your credit limit.
Take Out a Personal Loan
For a renovation project that could be considered minor, it might be worth thinking about taking a personal loan out in your name to cover the initial expenses. These loans are often capped at about $30,000-$35,000 and should be more than enough to repay at a rate that suits you, without drastically impacting your savings in the process.
Credit Cards Can be a Viable Option for Some
If you have no other choice and you don’t mind dealing with the higher than average interest rates proposed by most credit card agencies, then this loan type might meet your needs. They can be suitable for smaller projects where you may not need to borrow too much, but for substantial amounts you’ll definitely want to pursue a loan instead.
One Final Thing to Consider
Whatever type of renovation project you might be considering; be sure to look to the future as a top priority. If your renovations only appeal to you and not to any potential buyers when it comes to selling (if you ever decide to), then you might find yourself losing out in the future. Instead, try to add renovations and features that will appeal to all types of people and then you’ll be able to relax in the knowledge that your home will always be an asset – whether it’s lived in or sold for a higher value.
Credit Representative Number 496186 is authorised under Australian Credit License Number 389328 Disclaimer -This page/article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.