With the New Year here, many people often think about renovating their home. Since property prices are rising and interest rates are low in 2020, this is the perfect opportunity to get your dream home.
There are many ways to finance your home renovations, so it’s important to find out which one works best for your individual needs and financial situation. Here are some possible options you can consider below!
Personal Loans to Cover Renovation Costs
If you’re looking to make smaller home renovations, then opting for a personal loan is a good choice. It also works for anyone who does not have a home loan to borrow against, haven’t acquired sufficient equity or cannot access a redraw facility. Additionally, they tend to have much lower interest rates than credit cards.
Variable rate personal loans, which are secured with collateral, allows you to make additional repayments so you can pay off the loan quicker and save on interest. On the other hand, an unsecured personal loan is seen as riskier, and hence, will have higher rates due to the likelihood that you will default on repayments.
Construction Loan to Fund a Home Extension
Many people build small extensions, additional structures or granny flats as part of their home renovation plan. That’s why construction loans are a popular alternative for many homeowners, since they can be used for covering the expenses incurred in stages as you build.
By releasing funds through these different stages, you can save more money and improve your cash flow while the extra construction is taking place and not yet in use. With construction loans, you are allowed to make interest-only payments until the building extension is complete – however, it’s important to note that these payments don’t reduce the principal loan amount.
Cash-Out Finance to Boost Equity
The New Year is one of the best times to review your home loan. You could potentially save thousands by switching to a new lender with a lower interest rate or by switching to a different home loan with your current lender.
In these ways, refinancing your home loan can be a great way to access cash-out finance meaning that you can increase your loan limit and withdraw the difference in cash.
When refinancing your home to get extra cash for your home renovations, you should not commit to a much longer loan term. An extended loan term means incurring higher interest than your original loan, so make sure you understand the loan conditions before applying.
To get more help with the best financial products for your New Year home renovations, contact our mortgage brokers today!