Part of the great Australian dream isn’t just being able to buy your own home. Many Aussie homeowners love to renovate, improve and update their homes. It could be simply for personal satisfaction or to add value to the home in the event that it’s ever put on the market.
There’s nothing quite as satisfying about having a vision for home improvements and seeing that vision come to life.
Wanting to renovate your home is a fantastic cause, but it’s also something that can cost considerable money, depending on the scope of the proposed renovations. Even just a simple repaint can cost a pretty penny, let alone remodelling a kitchen and bathrooms.
Home Renovation Loans are the key and this guide to home renovations finance is going to cover a few points to be aware of.
#1 – What Are My Options With Borrowing for a Home Renovation?
When it comes to acquiring finance for home renovations, you have a number of options available to you. The easiest and fastest option is to apply for a Home Renovation Loan or a standard Personal loan, using home improvements as the primary reason for wanting the loan.
A second option is to take advantage of the equity you’ve built up in your home and take out a second mortgage to cover the costs of your renovations.
Thirdly, if your renovation project is only a small one, then perhaps applying for a credit card will often be enough to cover the costs associated with the project. Although this may seem the most straightforward, it is important to understand that credit cards often attract the high interest rates.
It really depends on your personal circumstances and the scope of your remodelling project as to which option will suit you best.
#2 – Work Out How Much Money You Will Need
There’s no point even thinking about what finance option to chase until you have a fair idea of how much money you need to borrow to complete home improvements.
This means you need to first sit down and formulate a budget for your renovations. This budget needs to include the cost of all the materials and fittings, tools, paying for tradies and so on. It can be difficult to arrive at an accurate or exact figure from the outset, but a rough idea will give you an indication of how much cash you’ll need to borrow.
Once you have a budget written down and a total figure, it’s always wise to add a bit more to that figure, as there is bound to be stuff you haven’t thought of or unforeseen expenses that crop up during the renovation phase. It’s better to have too much money than not enough cash to get the job completed.
#3 – Work Out Your Actual Borrowing Power
It’s all well and good to decide that you want to borrow X amount of money for home improvements, but you also have to take your borrowing power into consideration. For example, you might decide you need $100k to complete your dream project, but your borrowing power might be limited to only $50k.
There are ways to work out your borrowing power. One thing you can do is have a discussion with your lender to determine how much money you can potentially loan for renovations. Another option is to visit the lender’s website and use the borrowing power calculator you’ll find on the websites of most Australian lenders. This calculator will at least give you a rough idea of how much you can afford before you speak to your lender directly or submit an application for a loan.
#4 – Does the Lender Offer Terms That Suit Your Circumstances?
If you have the financial means, rather than remaining in debt for a lengthy period of time, you may want to opt for a Renovation Loan on short terms; perhaps a few months to a few years. Does the lender offer short term finance?
If you were to take out a Personal Loan for home renovations with a bank, for example, their minimum terms might be two years to repay the loan. This won’t suit you if your desire is to get the loan repaid within 6 months. The longer you repay the loan, the longer you have a debt hanging over your head and the more you’ll be paying in interest.
For short term loans, private lenders are the best option.
Cashify Can Help
Cashify specialises in helping everyday Aussies realise their home renovation dreams. We have a range of loans that may suit you, so get in touch today to discuss your options.
Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.