Whether you’re just looking to give your house a fresh coat of paint or are giving it a thorough makeover, the costs of renovating a property can quickly add up. The great thing is that there are a wide range of finance options designed for practically every budget and need. Below are some of these options along with their pros and cons based on your situation.
- Personal loan. This type of loan is ideal if you are looking only to borrow a small amount for your project. Its advantage include the fact that some banks may offer rates that are lower than credit cards, and having an option to take out an unsecured loan means you don’t have to provide any security for the loan. It may also come with a variable rate, which provides you with even more advantages such as being able to make additional repayments every month without any penalty. This will enable you to pay off your loan sooner if your finances allow it.
- Use your home’s equity. A home equity loan is another option available to finance your property renovation. This may be right for you if you’ve already built a sizeable equity in your property. The amount you will be able to borrow will generally be limited to 80 per cent of your property’s equity. So if your property is worth $500,000 with $150,000 remaining on the loan, it means that its equity is $250,000.
- Construction loan. A construction loan is designed for bigger renovation projects. The amount you will be able to borrow will also depend on the equity you have, but the figure will be based on the value of the property once the renovation is completed. So if your property is estimated to be worth $600,000 after the renovation, and you still have $200,000 remaining on the loan, it means that the estimated equity will be $480,000, and you’ll be able to access $280,000 of that figure. With a construction loan, however, the lender will not generally provide you with the full loan amount upfront. Rather, portions of the loan will be released in stages. The advantage of this is that you’ll only pay interest on the amount you’ve already drawn out, thus lowering your overall payments in the process.
Whichever finance option you choose for your renovation project, it’s also important to ensure that it is geared towards increasing the value of your property, particularly if it is one for investment purposes.
Speak to Launch Finance today about the most appropriate finance option for your renovation project.