The idea to renovate can be challenged by budget; how do you afford your dream renovation? While you may not have the savings squirrelled away for projects like this, there are options available to you that can help you complete the renovations the way you want to, without having to DIY or skimp on the essentials.
In this article, we take you through the options available to help finance your home renovations, and how easy it is to make the home of your dreams a reality.
Know your budget
Before looking at which finance option suits you best, it’s important to establish how much money your renovation will likely cost, so you’ll know how much money you’ll need from alternate financing. We suggest finding the builder and suppliers you want to work with to obtain a detailed estimate for your completed works. Once you’ve established the estimated costs, add a buffer of 10 to 20% to cover any unforeseen costs.
From here, it’s wise to establish how much you can afford to repay each month, and in what time frame. What you want to avoid is taking out an extended loan you can never repay. It may be worth using our home loan repayment calculator to work through the basics prior to committing to anything.
Once you have the facts about your finances and your renovation costs, you can easily assess which financing option is best for you.
Borrow the money
There are multiple loan options available. To make sure you end up with the best finance for your situation, a bank or financial institution will evaluate your current income, the time in which you intend to pay the loan back over, and the size of the loan you need. There will also be other considerations such as any existing debt you may have. Your lender will help you figure out what will work best for your current situation.
Top up your home loan
If you have a current home loan for your property, the desire to renovate could be a good reason to investigate refinancing options or to explore the options for extending your current home loan.
Whether or not you’re able to do this will depend on your bank or financial institution, and the type of home loan you have. It’s a sound way to secure your funds for home renovations without taking out an additional loan. The best way to determine if this option suits you, is to speak to your mortgage provider to assess your specific situation, as well as the equity in your home.
Investigate personal loans
Your home renovations may not require as much finance as you initially thought, and if you find yourself in a position where you’re only looking into smaller projects and therefore lower renovation costs, a personal loan may suit. This way, your loan can be repaid over a shorter time period.
Ask for additional repayments
No matter what type of renovation loan or finance you choose for your project, it can really pay to ask your financial institution about the ability to make additional repayments that are outside of your scheduled ones.
For example, if your financial situation changes - perhaps you transition into a higher paying job or you receive a sizeable tax return - you may be able to pay off the loan sooner than agreed, but not every loan has the option to make additional repayments. If this is an option you would like to have, discuss it with your lender before committing to anything. It doesn’t mean that you need to start putting extra money towards your loan right away, but the option will be available when it suits you, which can mean getting your loan paid off sooner.
What is the right option for you?
While it may feel like a daunting prospect acquiring additional finance for your renovations, there are a range of options available for you to consider. To find the solution that suits you best, you simply need to assess your situation, speak to your lending institution and weigh up the options.
If you aren't sure what your next steps should be, contact us and discuss how you can get the funds to make your house, your dream home.