Will I “Renovate” or “Relocate” my Home?

The burning question on the minds of many Australian homeowners is – will I “Renovate” or “Relocate”? If you are a home owner you may have discovered that the high cost of purchasing a new home with the cost of Stamp Duty and selling your existing home far outweighs the challenges of renovating your current home. However, you should only renovate if the renovations will:

  1. Add value to your home
  2. Result in an improved standard of living
  3. Be used to perform emergency repairs or full home extensions

Most lenders/credit providers will let you borrow the funds to improve the value of your home for any worthwhile purpose.  If non structural you can apply for a renovation loan however if structural you will require a construction loan as not all lenders/credit providers process Construction Loans.

What Types of Home Renovation Finance can I choose?

Home Equity Loan – This financing arrangement is perhaps the most common way for Australians to finance their small non structural home renovation projects. A home equity loan works where you borrow the money against the value of your home.

To illustrate this I have provided the following example:
The example assumes your home is worth $700,000, and your mortgage loan is $300,000
From the example illustrated above, you will have $400,000 equity in your home, which you can use to fund your renovation project up to the maximum lending lvr of your credit provider.

The recent rise in-house prices has resulted in many Australian homeowners having acquired considerable equity in their property, this can make getting a home renovation loan easier for these people. A Home Equity example would be:

  • Renew/update your bathroom or kitchen
  • Landscaping
  • Painting
  • Emergency Repairs

Construction Loan: – This financing arrangement is available for you to complete large-scale renovation projects that require council approval and the services of a licensed builder. The lender/credit provider will impose the following restrictions when they are considering a construction loan for home renovation.

This is a type of funding that credit providers require on structural changes so they can control disbursements and with hold the last progress payment to the builder until they furnish all council approvals. A Construction Loan example would be:

  • Add another bedroom, or any other room
  • Renew/update your bathroom or kitchen
  • Add a pergola and outside recreational area (If council approval is required)
  • install a swimming pool
  • Extend your garage from a single garage to a double
  • Construct a secondary dwelling on your existing property with a granny flat construction loan
  • Any other structural or non-structural construction

Personal Loan: – This financing arrangement is a suitable option for you to consider if you do not have any equity available in your home or you only have to complete some minor renovations. By choosing a short-term personal loan, you will find that the personal loan interest rate is much higher than a home equity loan and you may be limited to the amount you can borrow (e.g. from $5,000 to $50,000)

Your finance broker will provide you with a wide range of finance options and products after creating a budget for you. But, remember that you should be clear about your future plans as it will help you in choosing the right finance option.

Finance Me provides access to easy funding for home renovations or construction no matter your credit profile. If you are currently considering renovating your property and applying for a home loan, or for any type of residential finance, get in touch with our mortgage brokers today.