When it comes to financing a renovation, there are many options depending on the type and cost of renovations you wish to undertake.
For instance, large renovations need more money than smaller
ones, like structural changes, adding a pool etc.
For larger changes, refinancing your mortgage may be the
best option however these changes may increase the value of your property.
Whether or not refinancing is suitable will depend on the
type of mortgage you currently have and the break costs involved.
If your renovation is a major construction that requires the
long term services of a builder, you might want to consider a Construction
Loan.
These loans make the building process easier and enable you
to draw down on funds as required only paying interest on the funds as you use
them.
These loans can provide big savings and when Construction is
complete, you can often nominate what Home Loan product the Construction Loan
can revert to.
If you have had a mortgage for a while and have built up
equity in your property, if your renovations are going to add significant value
to your property, then a simple mortgage extension can be a good idea.
You can recover the costs when you sell your property with a
higher sale price.
Home Equity Loans are another option, as they allow you to
access built up equity in your home if you don’t want to refinance or sell.
It is possible to take out an additional loan against this
equity, provided that your financial circumstances allow you to service the
additional expense.
This will involve having your house valued to determine the
amount of equity you have.
Home Equity Loans can be spent on anything such as
renovations, investments etc.
A Line of Credit is similar in that it is usually secured
against your home.
This facility gives you access to money as you need it and
you only pay interest on the money used, like a credit card but with a lower
rate of interest.
You can use it for just about anything however, you must be
disciplined and preserve the equity in your home and not spend the money on
things you don’t need.
Also, many mortgage products also offer a redraw facility.
This allows you to withdraw any extra payments you may have made on your
mortgage.
If you are ahead on your mortgage and wish to access funds
to renovate, this is a very good option.
Need a property or renovation loan?
Contact us @ propertyloans@realrenta.com and
we will arrange for Jon our specialist broker to contact you soon.
Jason Gwerder
Wednesday, 7 August 2019
