How to fund your home renovations
Spring is well and truly here, and it’s the perfect time to start your next home renovation. If the warmer weather has you motivated to dust off those gloves and tools, the Credit Savvy Team has compiled a few ways you can consider financing your renovation.
Regardless of how big or small your renovation project may be, you might need to find the funds to make it happen. It’s important to do your research and have a budget plan to work out how much you need to renovate.
Tap into your savings
One of the most straightforward approaches to funding your renovation is using your savings, because you don’t need to worry about paying any money back or incurring any debt. If you’re planning on using your savings, it may be worth checking that after you’ve withdrawn the amount required for your renovations, you’re still left with an emergency fund to deal with any unexpected expenses.
Take out a personal loan
A personal loan could be an option for you if your renovation project is on a smaller scale. If you choose to go with a peer-to-peer lender, they usually provide more competitive interest rates than what the mainstream banks can generally offer. They also utilise credit scores as part of their credit assessment process, which means if you have a good credit score, you may be able to get a lower interest rate on your loan.
Check out our comparison service to see what personal loan offers are in the market.
Take out a construction loan
If you’re planning on a major renovation with structural changes, you may need to consider a construction loan. A construction loan allows you to draw funds from the loan progressively as your invoices arrive, so you only pay interest on the payments made until the loan is fully drawn.
Use your home’s equity
Taking out a home equity loan is a common way to fund home renovations. Equity is the difference between the bank’s valuation of your house and the amount you still owe on your mortgage. Do keep in mind that this method means you will have a larger mortgage, your repayments will increase, and it will take longer to pay off the loan.
Refinance your home loan
It’s always a good idea to evaluate your financial situation and review your current home loan every few years to see whether it still suits your needs. If you can find a more competitive deal, refinancing to a lower interest rate home loan means your monthly repayments could decrease, saving you money that can go directly towards the funding of your renovations.
It’s important to remember that refinancing your home loan is a similar commitment and process to taking out a new home loan. There could also be additional fees and costs as part of refinancing, so make sure that you understand how much this could all add up.
Home renovations are definitely not something to rush in to. Take your time, do your research to understand what costs are involved and which option to finance your home renovations suits your financial situation.
If you want to speak to someone to discuss your options, you can visit our mortgage broker partner, eChoice, to get all your home loan questions answered.
This article is sponsored by eChoice.
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