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.
Do you need to access finance for your renovation? Contact us @ propertyloans@realrenta.com and we will arrange for a mobile lending specialist from our trusted finance partner to call you.
