Considering transforming your home from ‘banal’ to ‘brilliant,’ but lacking the funds to support your makeover? Don’t worry! At Clark Finance Group, we’ve compiled a comprehensive list of five home renovation finance options that can help make your dream a reality. Whether you’re looking for an equity release, construction loan, line of credit, personal loan, or even considering credit cards, we’ve got you covered.
1. Equity Release/Top Up Home Loan
One of the most common ways people finance their renovations is through an equity release or top-up loan. This option allows you to borrow against the current value of your home, even before making any value-adding renovations. If you own your home outright, you can usually borrow up to 80% of its value. If you have an existing mortgage, you can borrow the difference between the loan balance and 80% of the property’s value.
2. Construction Loan
For those planning a complete home transformation and major makeover, a construction loan offers an ideal solution. With this option, the lender assesses the post-renovation value of your home based on building plans, allowing you to borrow against that value. Construction loans typically offer attractive mortgage interest rates, making them a cost-effective choice compared to credit card or personal loan rates. The loan amount is usually disbursed in staggered payments over time, aligned with your fixed price building contract.
3. Line of Credit
A line of credit provides you with a flexible revolving credit line that you can access whenever needed, up to your approved limit. With this option, you only pay interest on the funds you utilize, and as you pay off the balance, you can re-borrow unused funds without reapplying. However, it’s important to manage your serviceability carefully and make principal-reducing repayments to avoid getting overwhelmed by interest payments.
4. Personal Loan
If your renovation plans involve minor changes, a personal loan may be a suitable option. Personal loans typically have a cap of around $60,000, and although interest rates are higher than home equity loans, they provide a convenient repayment period of up to seven years.
5. Credit Cards
Credit cards should be considered only for small-scale projects. While interest rates on credit cards are higher compared to mortgages, they might be acceptable for tiny renovations where the additional interest could be lower than loan establishment fees.
It’s essential to consider the value your renovations will add to your home. Aim for changes that appeal to a wide range of potential buyers, helping you sell your house faster and at a higher price. Keep in mind that renovations should generally increase the value of your property beyond the cost of carrying them out.
At Clark Finance Group, we understand the importance of finding the right financing option to bring your home renovation dreams to life. Whether you choose an equity release, construction loan, line of credit, personal loan, or credit cards, carefully assess each option based on your specific renovation needs and financial circumstances. We’re here to guide you through the process and help you make informed decisions. Start your home transformation journey today!