For those home owners who are thinking of renovating their property, erecting a shed or even putting in a pool, it's extremely important to consider how you intend to fund the renovations when putting your initial plan together.
Of course, there are many different financing options available, but it is finding the right solution for your needs that's the key.
For instance, you may find that you have built up a certain amount of equity in your home which you could access to fund your renovation. Equity is the difference between what the property is worth and how much is left owing on the mortgage. So, say for example your home is worth $300,000 and you have $100,000 left to pay on your mortgage. This would leave you with $200,000 in equity.
It is important to note however, that the amount of equity a borrower can access depends on how much the lender will let them borrow. So you’ll need to prove that you can service any increase in debt – Essentially, just because you have $200,000 in equity, doesn’t mean you will be allowed to borrow all of this to fund your renovations.
Another way you could fund your renovations is through refinancing. By refinancing your mortgage, you may be able to borrow more money to help fund your renovation plans. And, with interest rates currently sitting at all-time lows and Australia’s lenders hungrily competing for business, refinancing could be an ideal solution for some borrowers.
Of course, these are merely a few of the finance options that may be available to you when renovating your home, which is why it is extremely important to do your research and investigate which option will best suit your needs.
In fact, this may also be a good opportunity to shop around and compare your loan to the hundreds of others to see if there is one offering a better, well suited option. If you have had your loan for a number of years it may be possible that a new loan structure will result in savings meaning the new repayments may be very similar to your current repayments - even with any extra borrowings you may have to take out to cover the cost of your renovations – and you may be able to get a better deal on interest rates and fees.
To learn more and explore which option could work best for you give Mike, your local Hunter Valley Mortgage Broker, a call on 0435 945 419.