Renovating your home is an exciting prospect. Whether you’re looking to change your home to suit your evolving needs or increase its value before selling, it can be a lengthy yet rewarding process.
However, it is a huge financial investment, so you must be well educated about the costs involved before diving in.
It’s important to take time to thoroughly work out how you’ll finance the project and assess any potential additional costs that you may have to factor into the renovation. This is especially important if you are taking out a loan to fund the renovation.
Here are some of the most important things to consider.
What are the most important factors to consider when considering a home renovation?
Considering you’ll be investing not only a lot of money, but time and emotional energy into the project, knowing exactly what you want to get out of it before starting will ensure a level of satisfaction at the end of it all.
Prioritising the non-negotiables you’ll need to include in the renovation and separating them from the ‘nice to haves’ will be one of the most important factors in putting together a budget and plan.
From there, it’s recommended to seek out advice from an architect, engineer or builder to help assess whether your vision is viable. It’s worth discussing your plans with your real estate agents, too, if you do plan on putting your home on the market once renovations are done to ensure it’ll have buyer appeal.
Once you’ve gathered a general scope of what the project is definitely going to entail, you can then figure out what a loan might look like for you. Banks like Great Southern Bank offer budding renovators easy and detailed insight into how much they could potentially loan, with their borrowing calculator, as well as further financial advice to follow when undertaking a huge investment like renovating.
Can you use your current home loan to finance a renovation?
Depending on your position, you can absolutely use your current home loan to finance a renovation. Banks like Great Southern Bank will allow you to ‘top-up’ your current home loan to fund the work. This means you’ll be able to “top-up your current home loan up to 95% LVR of your current home’s market value and use the increased funds, to pay for your renovation,” according to Great southern Bank. This, of course, will increase your repayments and add extra interest to the loan in the long run.
You may be able to ‘redraw’ from your current loan too, if you’ve been paying more than your minimum loan repayments and you are ahead in your loan. This is typically a quick process that doesn’t require approvals or cost any extra in fees.
What are the different types of loans you can get when renovating?
There are a variety of different loans you can take out when renovating. The loans you’ll have access to will depend on your plans, as well as other factors like your salary and assets, so it’s best to discuss with your financial advisor or bank before applying.
Personal loans are also another option for those looking to borrow money when renovating, which typically allow you to borrow up to around $50,000. However, some lenders can offer higher limits.
Taking out a construction loan is a common way of financing large renovations (that are usually valued at $100k or more), which is an approved amount of money that’s paid in chunks depending on what it’s needed for at a particular stage of the process.
Overall, there is a multitude of financial options available to those looking to renovate their homes, so investigating your options with a financial professional and doing your research is essential. It can be overwhelming, so keeping a level head to ensure you’re enjoying the exciting process is imperative too.