Explore what finance options are available before planning a renovation.
Often a home renovation is triggered by a family expanding, general upkeep of the home, the desire to change the layout or design and to add value to the property.
Whether you’re planning to do the renovations as a DIY project or you’re engaging a builder or other tradespeople – a renovation is going to cost you.
RACQ Bank Manager Regional Lending Chris Betts says it’s important for homeowners to consider the reasons why they are renovating, understand the costs involved and have a clear end goal.
“Renovations are often about personal lifestyle choices and do not always result in an increase in property value” Mr Betts said.
“If your property has a home loan against it, your lender will want to know if you are doing significant changes to the property, for example raising a house to build underneath, adding rooms or changing the roof line.
“These types of renovations may need council approval and it may also be a condition of your lending to inform your bank of any significant, structural renovation plans - you may need the bank’s consent to undertake renovations while your home has a loan against it.
“If you need advice on financing a home renovation, contact your lending specialist before you start the project to avoid any issues down the track.”
Here are four different ways you can finance a home renovation.
If you don’t have enough savings to pay for the renovation, then adding to your existing loan (refinancing) or doing a separate home loan on the side is another option.
The renovation may add value to your property and the bank may be able to lend based on the improved valuation prior to completion. This is sometimes referred to as a construction loan. Things to consider if applying for a construction loan include:
It is important to be aware that increasing the amount of your mortgage will impact your Loan to Value Ratio (LVR). Lenders often require that homeowners pay for lenders mortgage insurance (LMI) if the LVR goes above 80%.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.
The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.