Deciding to renovate is not an easy choice. It’s not just about deciding what else you want within or added to your home. You also need to consider how it’s going to be financed. Things like section 94 contributions and construction budgets need to be put in place before any work is commenced. This way, you can ensure that your renovation runs as smoothly as possible. For some, the trickiest part about performing large-scale renovations can be financing them. Today’s blog will be looking at different ways that you can finance your home’s renovation, so let’s get straight into it!
1. Use your own money
This is the obvious option, but also may not be very viable for some people. If you have the money, though, then using it to fund your home’s renovation would be the easiest choice. This is also the safest option, financially speaking. Paying out of your own pocket doesn’t just mean savings you may have – but also includes any investments that you can cash in and use.
If you are looking to go down this route, then be sure to leave enough money in your savings so you’re not left too out-of-pocket. The last thing you want is to spend everything on renovations only to have an unexpected financial obstacle sprout up soon after.
2. Redrawing from your home loan
If you have a home loan and have been paying more than the minimum monthly repayments, then you could use that money to finance your renovation. Redraw is where your bank allows you to borrow some of that extra money that you’ve paid towards your home loan. This can be an effective and easy way to finance your renovation – if the circumstances apply to you.
3. Using your equity
Your home equity is the difference between your home’s valuation and your remaining mortgage. This is only an efficient means if you have achieved a usable amount of equity in your home by either bringing your home loan down or if your property has increased in value since you purchased it.
4. Using a line of credit
With a line of credit, you may borrow from the credit as you need it and the interest is only calculated based on what you’ve borrowed – instead of the total amount. This works similarly to a credit card in a lot of ways. You only have to pay back the amount you’ve borrowed (plus interest on that amount) – instead of the entire credit limit.
You can also go for a line of credit against your home – which uses equity as security. You can only use this type of loan if your equity is substantial. One advantage of this is that since the lender will have your home’s equity as security, there may be a lower interest rate than usual. Using a line of credit to finance your home is especially helpful when paying for materials or contractors, as you can withdraw money from it as you need it.
5. Personal loan
For a credit line, you may borrow as much as you need from the predetermined amount and only pay interest on what you borrow. For a personal loan, however, you borrow the entire amount at once and must pay it back in monthly instalments with the additional interest. That is the primary difference between the two. If you’re considering a personal loan for your renovation, it’s best to establish how much you’ll need – such as if you’re going to need to rely on the loan to finance the entire project or just part of it.
6. Construction loan
These types of loans are designed specifically for building and renovation projects. They offer you the money you need incrementally, so that contractor fees can be paid on time. This allows you to control the cash flow as you will only need to draw down the money as you need it. You will also only be required to pay interest on the amount that you have drawn down as opposed to the entire limit of the loan – similar to a credit line.
Thinking of renovating your home?
If you’re looking at renovating your home, then you’ll need to keep in mind that section 94 contributions may need to be made – depending on the value of the renovation. That’s where Section 94 comes in. Our highly experienced and premium surveying services encompass everything from quantity surveying to detailing section 94 contributions and reports.
So, if you’re considering renovating your home and require some assistance with construction budgets or other surveying services, then please give us a call on 0413 953 869. You may also get in contact with our Melbourne or Sydney teams.