Renovating your home can add plenty of value to it. It can also significantly improve you and your family’s lifestyle. But it can be expensive. That’s why many homeowners need to borrow money to do it.
Whether you’re looking to increase the size of your property or just to renovate a single room, you’ll want to know all your finance options . Some lenders may ask you to take out a particular type of renovation loan. But it’s important to choose the option that’s best for you and your personal circumstances.
Option 1: Refinance your existing home loan
A common way to fund home renovations is to refinance your existing loan. This could mean increasing your borrowing limit with your current lender or moving the loan to a different one.
If you’re changing the terms of your home loan, there’s also the option of debt consolidation. This means that you put all of your debts into one loan and only make one repayment.
Option 2: Use a redraw facility
This option may be available if your home loan has a redraw facility and you’ve made enough extra repayments over time. You can ‘redraw’ those extra payments to pay (or at least help to pay) for your renovations.
Option 3: Line of credit
By using a line of credit, you can access renovation money as you need it to pay for tradespeople and renovation materials. Interest is charged on the amount you’ve borrowed instead of on the total loan amount straight away. That could mean lower short-term costs.
But it’s important to remember that using a line of credit can be complicated. There are also fees involved. For example, an establishment fee and monthly service fees. It’s best to talk to a mortgage broker about whether this option is suitable for your situation.
Option 4: Home equity
Another way to finance your renovation costs is by using the equity you have built up in your home over time. This is the difference between your home’s market value and the remaining balance of your mortgage. You may find that you have a considerable amount of equity to use, especially if you’ve owned your home for a long time.
It’s important to note that you will not be able to borrow your total equity amount. It will depend how much your bank is prepared to lend. This will be determined based on things like your loan-to-value ratio and how much you can borrow without having to pay lenders’ mortgage insurance.
How we can help
If you’re thinking of doing a home renovation, our experienced and licensed brokers at Wisebuy Investment Group can help you to find the right finance for your specific situation.
We service a diverse range of clients in Newcastle, Lake Macquarie, Port Stephens, the Hunter Valley and the Central Coast.
Contact us today for an obligation-free chat!