Options for Home Renovations
Rather than sell and buy a new property, it may be easier and more cost effective to stay where you are and renovate your home. When you sell, you have the very expensive cost of real estate agent selling fees. Then when you buy, there is stamp duty on the new property, along with other transfer and purchase costs. You could be paying anywhere between $30,000 to $100,000 to move house. Why pay these costs when you could be perfectly happy where you are with just some little improvements. Working out the right loan for you takes some research. Here are some loan options for home renovations.
Options for Home Renovations
If you love where you live but need a bigger or better home, why not renovate and stay where you are. There are a few options to fund this.
If you have repaid more than you were required to and are ahead of your repayments. You may be able to redraw the additional surplus funds and use them to assist in your home renovation. There is no need for the bank to be involved as most redraws can be done on-line. The funds would then be transferred into your transaction account for you to use. Redraw funds can be used for any legal purpose. Therefore, you may be able to improve your property and in the meantime increase your equity and not need the bank to do anything.
Increase / Top up
An increase can be done to your existing loan, or a secondary loan can be set up. If you already have the equity in your property, most lenders will allow you access to a lump sum and you pay your contractors as you go. Ideally you would keep your loan to less than 80% of the property value. This will mean you avoid having to pay costly Lenders Mortgage Insurance (LMI).
Doing a little more than just a minor touch up and require a bigger loan? The lender may treat this as a Construction loan. The good thing about this is, they may also look at the projected value once the renovation is complete. This may help keep your costs down. If the increase would normally take you over 80% of the properties current value, then we can look at the higher on-completion value, once renovations are complete. Your renovation should add value to your property. Again, try to ensure the additional funds keep you below 80% of the on-completion value, avoiding Lender Mortgage Insurance (LMI).
If the increase is only for a small amount, you may consider a personal loan. Although the interest rate may be higher, a personal loan is usually only over a maximum of 5 to 7 years, therefore can be paid off quickly. If you’re looking to invest in other property, it makes sense to use a personal loan if you are doing the renovations to improve your equity. If this was the case, it is most prudent to keep the small debt unsecured and away from using your equity.
The Home Loan Comparison Co. compares home loans from a much wider variety of banks than most people have time to consider, and we find the loan that suits your goals.
We are experienced, knowledgeable and dedicated to building ongoing relationships to keep on providing personal and valuable service that is rarely experienced when dealing with the banks.