A change is as good as a holiday. Freshening up a tired kitchen. Adding an extra room. Installing an ensuite. These are all great ways to add some life and value to your home.
Before you rush off to Bunnings or your local hardware store, it’s important to know the ins and outs of renovation finance so you can plan your home makeover. There are a variety of renovation finance options available, depending on the size of your renovation, how you plan to carry it out, and what type of loan you may already have on the property.
Everyone’s situation is different, so before you start applying, you’ll want to do your research. If you want a more personalised look at what might work for you, let’s chat so we can get to know you a little better.
When you’ve decided what you want to get done and what your reno costs will look like, it's time to get to work on your finance options.
Renovating using the HomeBuilder grant
Recently, a new Federal Government grant was announced called HomeBuilder. It’s designed to help new home builders and renovators (like you) transform existing houses, while boosting the economy. It’s essentially a tax-free $25,000 grant for eligible applicants that apply between 4 June 2020 and 31 December 2020.
There are a few conditions to meet, like: only using the money on a home you’ll live in; only using professional contractors; and spending a minimum of $150,000 on renovations. Make sure to find out more about the HomeBuilder grant before you factor it into your budget.
What is home equity?
Your home equity is the difference between how much your house is worth, minus how much you owe on your home loan. For example, if your house is valued at $550,000 and you have $350,000 remaining on your home loan, your home equity is $200,000. Nice and simple.
When deciding if borrowing money to renovate your home is worth it, it’s a good idea to weigh up if the renovations will increase the value of your home. You might not want to invest $40,000 into a new kitchen if it will only increase your property value by $15,000 when you sell. A new kitchen might be exciting in the short term, but consider what over-investing might mean for you in the long term.
If you aren’t sure about you options you have available to you, have a chat with a People’s Choice home loans specialist.
Home renovation loans
Another finance option that can help cover your home renovation costs is a construction loan. These are a pretty unique type of loan: the loan amount is given to you in staggered payments over time instead of as a single upfront payment. This means you can withdraw your funds gradually while you renovate, so you only pay interest on the amount you have drawn on.
At People’s Choice, we have a few different construction loans for you to compare rates and repayments on.
Mortgage refinancing to cover renovation costs
Mortgage refinancing essentially means replacing your current home loan with a newer one. You can refinance with us if you have a loan with another financial institution, or if you already have a home loan with People’s Choice. There are plenty of reasons to refinance your home loan and one common reason is to simplify your finances while you renovate your home.
Refinancing can help you simplify your repayments, consolidate your debts, take advantage of changing interest rates, or find a loan which better suits your changing needs.
For more about refinancing with People's Choice to help plan renovation costs, you can reach us here. We can also chat about any of the other finance options listed above.