Nicole AveryHome renovations can improve your quality of life and add value to your property. At Bluestone Home Loans, we believe that every Aussie deserves to realise their dream of owning a property, and eventually, turning it into their dream home. In this article, we cover 5 popular ways to cover your house renovation cost.
If you own a home, chances are you’ve dreamed about renovating it.
Home renovations not only help you to love your home, but can also add value to your property. Sounds like a no-brainer, right? One small hurdle: renovating can be expensive.
The good news is that there are multiple home renovation financing options available depending on your financial situation, budget… and importantly, your grand design plans.
Your savings
If your financial situation means you have enough savings to fund your renovation, this is great! Just make sure to allow for unforeseen costs and emergencies. Have a backup plan for if the savings well runs dry.
Your credit card
If renovations are minor (e.g. cosmetic) and the outlay is small, your credit card might be suitable – just be mindful you’ll need to pay down the costs incurred within the interest free period on your card, to avoid hefty additional interest and fees.
If funding your renovation using a credit card, you would likely require a very high credit limit. Also, interest on credit cards is typically very high – usually much higher than other loan types. So, unless you can pay it off immediately, beware of pulling out the plastic to finance renovations.
A personal loan
Turning to a personal loan for home renovation financing can work, depending on the extent of the renovation and if managing multiple debts suits your situation.
One thing to note: Personal loans are usually limited to around $70,000-100,000, so if you’re looking to give your home a major facelift, you’ll likely need to look at a different option.
Interest rates on personal loans do vary depending on the lender, but even competitive loans will likely accrue more interest than other funding options. Home loan rates will likely be lower than personal loan rates.
Your home loan offset or redraw facility
If your home loan has a redraw or offset facility where your mortgage repayments live, you may be able to fund your home renovation using this.
When your home loan is with us, requesting a redraw is as easy as filling out the relevant form. Just make sure you continue to be able to comply with all our obligations under the Loan Agreement.
Keep in mind that if you use the money in your offset account, you will lose the benefit of reduced interest repayments. Similarly, when you take money out with your redraw facility, the principle payable on your loan will increase.
A home loan increase
You may have ‘equity’ in your home. This is a great thing that means your wealth is growing as the value of your home grows!
Equity is the difference between the amount of your loan and the value of your home. If you’ve been paying off your home loan for a while, it has likely increased in value, so you may have equity in your home.
You may be able to borrow against your equity and use the money to finance your renovation. This is typically less complex than totally refinancing or applying for a new loan. If you’re thinking ‘how much can I borrow?’, it’s time to get in touch with your broker.
To learn more about using your Bluestone home loan to finance your renovations, get in touch or complete our loan increase enquiry form today.
