Refinancing for renovation
With all the time we’ve been spending at home, it’s important that we provide ourselves with an environment we want to live in. Some of us might even think of renovating our house. We renovate our homes for different reasons: to make them look more aesthetically pleasing or feel more comfortable, to put our mark on the property and of course, to add to its value. When you renovate, think of it as a business plan or as your special project you are starting from scratch.
There’s no better project to work on than your own home! But the first challenge you’ll face is finding the funds for the renovation.
If you’ve got enough equity built up in your home, your best option might be refinancing to renovate. This means you could potentially leverage the equity in your home to top up your loan and help fund the renovation.
What is refinancing?
Home loan refinancing means taking out a new loan on your property and using it to pay out your current loan. This may involve moving to a new lender, or negotiating a better rate with your current lender. When comparing home loans, it’s important to consider the upfront and ongoing costs associated with refinancing for renovation in the short and long term.
It’s more likely that the benefits of refinancing to renovate will outweigh the costs, but it’s always best to consult with your lender or agent before taking the step.
Options for refinancing to renovate:
- Construction loan: These loans are for it your renovation plan requires a lot of building requirements and funds. Unlike regular home loans, with a construction loan you draw down what invoices you need to pay as they arrive. This generally prevents you from paying any interest on the additional amount until you use it.
- Line of credit: These can be used in smaller, cosmetic renovations not requiring a large injection of funds, as they don’t involve structural changes. A line of credit home loan allows you to draw up to 80% of the equity in your property.
Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity.
Adding more life to your home is an experience of a lifetime. Many have seen the significant positive impact on their lives, so consider the chances and go for it!
If you’re considering refinancing for renovation or want to know more, talk to us: https://bfg.org.au/talk-to-us/
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.