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Paying for those ‘must-do’ building works

All buildings require repairs from time to time, but how the necessary funds will be raised can hinge on the type of property you own.

All buildings require repairs from time to time, but how the necessary funds will be raised can hinge on the type of property you own.

As a home owner it always pays to leave room in your budget for ongoing repairs and maintenance. Without a rainy day pool of cash to draw on, home owners can be left scrambling for cash to complete emergency repairs like a broken hot water heater, dodgy electricals or even a leaking roof.

If you're ahead with your loan, redraw can provide a source of cash for repairs. Alternatively, a home loan top up can provide emergency finance. Your Mortgage Choice broker can provide further information on how these can work in your circumstances.

Strata works differently

The picture is a little less clear when your home is an apartment or townhouse. That's because strata dwellings share common areas, and key decisions regarding the building and grounds are left to the body corporate.

A well-managed strata scheme will split apartment levies across two areas – an administration fund used to pay for regular maintenance, insurances and budgeted repairs; and a sinking fund for emergencies.

If the sinking fund is insufficient to cover the cost of repairs, the body corporate has a number of options at its disposal.

Firstly, it can raise a special levy to cover the cost of the unforeseen repairs. This effectively sees each owner chip in, and when the funds are raised the repair work can commence immediately. Or, the body corporate can increase regular levies however this is a slow way to grow funds, which may be a problem if the repairs are urgent.

Strata finance loans

A third option is for the body corporate to take out a strata finance loan. These are offered by only a small number of lenders, and the terms need to be reviewed carefully.  

The loan is taken out and repaid by the strata corporation, and the funds can be used to carry out repairs immediately - with the repayments factored into owners' regular levies.  However the individual owners can become responsible for repaying the loan if the body corporate defaults (cannot meet the repayments).

All this highlights the value of organising a strata report before you commit to purchasing a villa, apartment or townhouse. These reports typically cost less than $500 but they inform buyers about any possible issues looming on the property's horizon including potentially, up and coming repairs.

Discover options to help you fund major repairs by speaking with your local Mortgage Choice home loan expert today or call us on 13 77 62.

Posted in: Home loans

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