How To: Finance For A Home Renovation
Who doesn’t love a home renovation! Whether it’s a big job or small, improving your home is a very rewarding thing to do. Although it can be expensive, there are many home renovation finance options available. It’s important to choose the one that’s right for you. Here are some of those options but remember that you should always consult financial professionals before making a decision!
See more beautiful work by Mach Building Group here.
Using The Equity In Your Home
This is one of the most common ways of home renovation finance. It’s where the equity (the difference between the bank’s valuation of your home and the amount you owe on your mortgage) is used as collateral for a loan. To qualify for this loan, you need to have paid off at least 20% of your mortgage. Having a good credit score would also increase your chances.Personal Loan
Personal loans are capped to a figure roughly equal to that of a new car. So it’s recommended that personal loans be used for minor renovations that don’t require as much money. Also, note that the interest rates on personal loans are higher than on home equity loans.Redraw From Your Current Home Loan
If you are making extra repayments on your home loan, you can withdraw some of that money and use it to towards your home renovation finance. It’s easy to access and can be cheaper than other avenues since home loans usually charge lower interest than other types of credit.
See more beautiful work by The Tempo Group here.
Line Of Credit
If you have equity in your home then you can apply for this sort of loan. In a nutshell, it’s an arrangement where you access money as you need it. You can withdraw small increments of the loan amount and you only pay interest on the money that you use.Credit Card
Yes, we know that “credit card” has negative implications but a low-interest credit card is a viable option to fund a renovation. If you’re planning to make smaller, less expensive changes to your home then the money you’ll spend paying off the credit card may be lower than loan repayment.
See more beautiful work by Gaia Construction here.
Construction Loan
For construction loans, the borrowing amount is based on the predicted value of the property after the renovation is completed. Instead of receiving the full loan amount upfront, you’ll receive bits of it over a period of time. This will enable you to pay your construction invoices as they arrive.Use Your Savings
If you’re a good saver and have a stash of cash sitting there, using it to fund your renovation is a smart idea. You will avoid the interest rates, bank fees and repayments that come with loans. However, you shouldn’t use all of your savings on a renovation as it’s important to have money aside for a rainy day. Use your cash to cover a smaller project like a new paint job or replacing a door.Thinking of starting your own renovation project? Our team at iBuildNew can help you! Contact us on 1300 943 640 or customerservice@ibuildnew.com.au for free assistance in finding a builder.
Joel Robinson
Joel Robinson is the Editor in Chief at iBuildNew, where he leads the editorial team and oversees the country's most comprehensive news coverage dedicated to the new home building industry. With more than a decade of experience in residential real estate journalism, Joel brings deep insight into Australia's evolving home building and construction landscape.
