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Financing Renovations
Australians have always loved to renovate but all renovations cost money. No matter if you have a beer or a champagne budget, renovations need to be financed somehow. Here are some of the options that are available to you.
What to Do When Working Out Renovation Finance
When it comes to renovations, you need to decide what renovations are necessary for your home. Once you’ve done this, it’s time to work out how much you can afford for your home renovations. You need to take into account your household income and expenditure, savings, assets, your current home loan, and other debts such as credit cards or car repayments. Ask the financial institution how much you can afford to borrow and work out a realistic budget. Remember to allow for any major life changes. After this is done, have another look at your renovation plans. You may find that you need to make changes in order to meet your budget. There needs to be a balance between what you want and what you can afford.
Renovation Finance Options
You will need to work out if your renovation is structural or non-structural. Structural renovations will need council approvals and permits to carry out the work. You will also need a construction loan, which is different to a standard personal loan. Construction loans are not given as a lump sum. Rather, payments are made progressively at certain stages during the construction. Many lending institutions will require inspections before the loan can be drawn to ensure that the builders satisfy the terms of the contract and has delivered satisfactory work.
A smaller renovation project is much easier to finance. You can choose to finance these with a personal loan, or even use your credit card. Remember, if you choose the credit card route, you will have to deal with the high interest rates that these charge.
If your house has gone up in value since you purchased it, you can use the equity to increase your loan based on the increase in value. Using the equity in your home, you can draw down the loan as an when you require up to an approved limit. These loans are secured by a registered first mortgage over your property. Also, if you have made extra repayments on your mortgage, you may be able to redraw those funds to use for your renovations. You can even add to your existing mortgage. In most cases, you won’t have to go through the complete application process and this will save you time and fees.
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Related Categories
Extensions & Additions
Inspections - Building