Renovating your home can improve your quality of living and add value to your property, but the costs can add up quickly. Fortunately, you have a few different options when it comes to financing your home renovation. The right one for you will depend on the type and extent of your renovations – and your financial circumstances.
Dip into your savings
If you’ve built up some savings, you might want to use this money for your renovations. Depending on market conditions, using your savings for renovations can potentially give you a good return on investment – just make sure you have enough left over to cover any potential emergencies until you build your savings back up again.
Put it on your credit card
Putting your home renovations on your credit card may be an option if the renovations are relatively minor. Watch out though as credit cards come with much higher interest rates than other forms of financing. You may want to consider if there’s a more cost-effective option before you pull out the plastic, especially if you’re not sure you’ll be able to pay it off immediately.
Take out a personal loan
Depending on how much you need for your renovations, you might choose to take out a personal loan to cover the cost. Personal loans are usually capped so there’s a limit on how much you can borrow. The interest rate on a personal loan will vary depending on whether it’s secured or unsecured, and which lender you choose. Even with a competitive personal loan, you’ll likely end up paying more in interest than you would with another form of loan like a home loan.
Use your offset or redraw facility
If your home loan has a redraw or offset facility, you may be able to take the funds for your renovations from there. Just be aware that you’ll lose the reduction in interest repayments you gain from having money in these facilities and factor that into your long-term calculations.
Get a home loan increase
If you have equity in your home, you may be able to borrow against it and use the money to fund your home renovations. This is typically easier and faster than refinancing or applying for a new loan, as you can just add to your existing home loan. Your home loan interest rate will usually be lower than a credit card or personal loan, and the repayments are spread out over a longer period of time. Just make sure you understand how a home loan increase will affect your repayments, and ask about any fees associated with changing your loan. You can learn more about getting an increase on your Bluestone home loan here.
Renovating your home can increase its value and make sure it meets your changing needs. Get the finance right and you may get a good return on your investment.