The burning question on the minds of many Australian homeowners is – will I “Renovate” or “Relocate”? So, if you are one of these home owners, you may have also realised that the high cost of purchasing a new home and selling your current home far outweighs the challenges of renovating your current home. However, you should only renovate if the renovations will:
>> Add value to your home
>> Result in an improved standard of living
>> Be used to perform emergency repairs or full home extensions
Do Lenders/Credit Providers impose Restrictions on the Type of Renovations?
Subject to their credit policies and lending guidelines, most lenders/credit providers will let you borrow the funds to improve the value of your home for any worthwhile purpose, such as if you need to:
>> Add another bedroom, or any other room
>> Renew/update your bathroom or kitchen
>> Add a pergola and outside recreational area
>> Install a swimming pool
>> Extend your garage from a single garage to a double
>> Construct a secondary dwelling on your existing property
>> Any other structural or non-structural construction
What Methods of Finance can I choose?
Here are some examples of the popular methods to ensure easy home renovation:
Home Equity Loan – This financing arrangement is perhaps the most common way for Australians to finance their home renovation projects. A home equity loan works where you borrow the money against the value of your home. To illustrate this I have provided the following example:
>> The example assumes your home is worth $700,000, and
>> Your mortgage loan is $300,000
From the example illustrated above, you will have $400,000 equity in your home, which you can use to fund your renovation project.
The recent rise in-house prices has resulted in many Australian homeowners having acquired considerable equity in their property, this can make getting a home renovation loan easier for these people and reduces their need to dig into their own cash reserves.
Personal Loan – This financing arrangement is a suitable option for you to consider if:
>> You do not have any equity available in your home, or
>> You only have to complete some minor renovations
By choosing a short-term personal loan, you will find that:
1. The personal loan interest rate is much higher than a home equity loan, and
2. You may be limited to the amount you can borrow (e.g. from $5,000 to $50,000)
Construction Loan – This financing arrangement is available for you to complete large-scale renovation projects that require council approval and the services of a licensed builder. The lender/credit provider will impose the following restrictions when they are considering a construction loan for home renovation:
>> The lender/credit provider will not fund the full loan amount upfront to you
>> The lender/credit provider will release the money to you only in stages as the renovation progresses
Can I afford to Re-build my Home if it was destroyed?
You should already have normal home and building insurance in place, but you need to increase your building insurance to cover the costs associated with your home renovation project. So, if you cannot afford to rebuild your home if it were destroyed by damage from fire, or from any other natural disasters, you should ask yourself the following questions:
>> Do you have building insurance?
>> If you have building insurance in place:
1. Is the amount of insurance cover adequate?
2. What does your building insurance plan cover?
3. Does your insurance plan include Total Replacement cover or Sum Insured cover?
Don’t Delay and Take Action Straight Away
So, if you are thinking of renovating your home without any stress, you should seek advice from a professionally qualified and expert home finance broker who is a specialist in home renovation loans and, has helped numerous home owners when they had considered renovating their property.
He/she can arrange finance for your renovation project. A loan broker will provide you with a wide range of finance options and products after creating a budget for you. But, remember that you should be clear about your future plans as it will help you in choosing the right finance option.
Now that you have read this article, I sincerely hope it will help you to understand the easy ways of renovating your home with a professionally qualified and specialised finance broker.