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Turning a house into a home isn’t an effortless task and it tends to require a substantial amount of money to keep it from falling apart. Renovation loans can help you access financing to help your repair and maintain your home in a pristine condition. Here is how you can compare your way to a renovation loan that suits your budget.
1. Know your why
Having a plan set in terms of what you want to renovate can help you set a budget that doesn’t strain your finances. Before taking on a renovation project, it is essential to know the cost of the project you want to renovate and how long it will take to do it. A general rule of thumb is that renovations should not exceed 5% of the purchase price. This will help you take out a loan that can help you adequately cover the amount that is needed. Check to see if the loan comes with flexible features that are specifically created for renovations.
2. A loan type that matches your needs
Knowing what your finance options are is winning half the fight, but comparing these options to see if they match your needs and situation is important. Some people may choose to cover home renovations and maintenance through their home equity, but there are personal loans that come at a competitively low rate that can prevent you from adding more costs to your mortgage. Weighing the pros and cons of each option can help you see which one will work for you. You can also consider speaking to a broker or financial advisor so that you can make an informed decision.
3. Cost and repayments
The average cost Aussies had to fork out to renovate their kitchen was $10,000 to $45,000, depending on how long the project took. This is just one of the costs that will come when taking out a renovation loan. You still have to consider other expenses that come with a loan such as; ongoing fees, interest rates, and charges that come with it.
Checking features such as whether the loan comes with flexible repayment plans that work with your cash flow. In general, most loans come with the option to make payments weekly, fortnightly, and monthly. Using a loan calculator can be handy in finding out how much you will have to pay back in monthly repayments.
4. Are the renovations worth the investment?
When carrying out renovations it is vital to think long term. Researching whether the renovations that you are about to carry out will bring back a return on investment can be beneficial. According to Real Estate, a well-planned and executed can add up to 10% of the value of your home if you hold onto it for five or more years. As much you would love your own personal touches to your home, it does pay to add features that can be beneficial to future buyers.
Not everyone will have the option of taking out a renovation loan. Therefore, it helps to create a few D.I.Y projects that can help reduce the cost. Remember, if it is hidden behind a wall then its best to call in the professionals.
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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.
The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.
Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.
The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.
