Have you just bought a new home but don’t have any furniture yet? Or maybe you are working on a building project but haven’t considered your finance options. For these scenarios, and more, there are a variety of options where you can benefit from lower interest rates for your project, and the borrowing flexibility to turn your dreams into a reality. Below we take a look at some of the finance options available to you, and how they can contribute to your renovation project.
Home Equity Loan
Many individuals who need finance for a new home use a home equity loan. These loans are ideal if you want to renovate or furnish a new property. One of the most common ways to borrow a home equity loan is money you receive by borrowing against the value of your home or property.
Equity is the difference between the valuation of your home and the amount you currently owe on your loan. With a home equity loan, you will borrow against the current value of your home. Any renovations that add value will not be included in the terms of the loan. Typically, you can borrow up to 80% of your home’s value.
Construction Loan
If you are building your property or renovating it extensively, then a construction loan could be a useful finance option. A construction loan will give you the money you need for your project in instalments, as and when you need to cover costs. The advantage of this is it targets your loan and covers your major costs.
A construction loan, however, is considered a risky proposition for most lenders, and due to this, the interest rates can be fairly high. These loans tend to be short term, and at the end of the period, the borrower has options. You can refinance the loan and incorporate it into the mortgage, or take out a lower interest loan to pay it off.
Line of Credit
A line of credit loan is an excellent option for those looking to renovate a property as it offers flexibility and affordable repayment options. A line of credit is a revolving finance option that gives you access to an approved amount whenever you need it.
Unlike other forms of finance, interest is only applied to the balance owed rather than the total amount borrowed meaning that the interest paid on the loan can be controlled. It’s a flexible loan option that allows you to pay off the loan and re-borrow without re-applying
Personal Loan
For smaller projects in and around the home, or for buying new furniture, a personal loan could be the best option. A personal loan typically has an interest rate based on the full amount of the loan. The interest rates for personal loans tend to be higher than other finance options, such as home equity, but they are far cheaper than credit cards. They are normally used for projects costing up to $30,000 since this is the upper limit of a personal loan.
Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au
Disclaimer: While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action in relation to the matters dealt within this publication, you should seek professional advice.