How to Finance Home Renovations
Renovations are exciting, but it can be quite a long journey to have them done. Some homeowners renovate simply because they have a different vision of how their home should look and function, while others renovate to add value and maximise their ROI.
The reasons behind your renovations will affect your financing and timing, so it’s important to keep those in mind during the process. To ensure you stay within your means, it can be prudent to separate your primary “big ticket” objectives from your bonus objectives. This will help with prioritisation and staying on track as well.
There’s a lot of planning and forethought that goes into renovating before the process can actually begin. When it comes to your financing, there are several options you can take:
Home equity loan
The equity you have in your home is the difference between what you owe your lender and what your home is worth. Put another way, it’s the percentage of your home you actually own. A home equity loan enables you to borrow against this amount, leveraging your home equity.
A classic personal loan, in many cases, is the best option for those needing a little extra. One drawback is that these loans tend to have high interest rates. But because these loans are uncomplicated, it’s easy to keep track of your finances. You’ll know the exact amount you’re paying back (and when).
Line of credit
With this kind of loan, you can withdraw funds any time (up to a limit). Repayments are made in full or monthly. These loans tend to have lower interest rates than personal loans, and are secured against your mortgage.
Construction loans are essentially custom-designed for renovations. Unlike other loans that have strict payouts and conditions, construction loans can be paid back periodically depending on the amount of work that’s actually been done. You only pay interest on work that’s actually happened.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of renovating a home, you can contact us for advice about the best options for you when it comes to your financing. The choice you make can drastically affect your financial planning, so it pays to speak to the experts about it.