Home Renovation Loans

0 comments

in General

GD Star Rating
loading...
GD Star Rating
loading...

A renovation loan is ideal for making home improvements to an existing property. Whether you are planning bathroom renovations, kitchen renovations, adding a pool or completely rebuilding a property, we can help make it happen.

Some people love to renovate. For others one renovation is one too many. The more preparation you do, the better your renovation experience will be.

Set your budget – You should start with a clear understanding of your financial limits and the impact that spending to that limit will have on your household income. In many cases there are cost overruns and it is better to factor these in before you start the project.

Overcapitalising on your property– If you are renovating to build your dream home and plan to live in it for the next 20 years, then overcapitalisation may be less of an issue. To determine if you are overcapitalising, you will first need an estimate of the current value of your home. Generaly if you are seeking to borrow money for the renovation, the lender may require your home to be professionally valued during the loan application process.

Knowing what your home value is after the renovation is vital to ensuring you do not overcapitalise, especially if your goal is to remain in the property for a short period ir you are renovating for profit. Apart from the overall market you need to consider the individual home, the street and suburb. Some areas will always achieve higher prices than others.  As a simple guide, money spent on kitchens, bathrooms, master bedrooms and the family room are often considered good investments.

Living through a renovation -This can test the strongest people and their relationships. In some cases, it may not be possible to remain in the house. If you do have to move out for some or all of the time, you will need to factor this into your total budget. Living out of your home may also affect your home insurance cover, so it is wise to speak to your insurer about your plans to ensure you remain adequately covered.

Financing the renovation – Construction and renovation loans generally operate as an interest-only facility with a variable interest rate during the building period, before reverting to the whichever final home loan you have negotiated with your lender. During the building or construction period, you only pay interest on the part of the home loan that has been drawn down, or paid out.

Renovation loans pay out funds for the construction or major renovation of your property in stages called progress payments, rather than as a lump sum like a more traditional residential home loan.
Progress payments are typically made at the completion of five different stages of construction:

  1. slab
  2. frame
  3. external brick work
  4. lock up
  5. practical completion

Should you be thinking of renovating I hope you found these tips useful. Feel free to contact me at www.bestfitfinance.com.au

Cheers Suzy B

Leave a Comment