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If you’re embarking on a large renovation project such as an extension/renovation or a knockdown and rebuild, you could consider a construction loan.
A construction loan is typically based on the estimated final (post-renovation) value of your property and is designed for people who are building a home or doing major renovations, as opposed to buying an established property. A construction loan most commonly has a ‘progressive drawdown’. This means you receive installments of the loan amount at various stages of construction, rather than receiving it all at once at the start. You generally only pay interest on the amount that is drawn down during the construction period and then revert to a standard principal and interest loan once your home has been fully built.
If your home improvements are non-structural, for those with enough equity built up in their property, refinancing could be an option to consider. Home equity is the difference between the value of your home, and how much you still owe on your mortgage. Refinancing may allow you to leverage your equity to borrow the funds required to complete your non-structural renovations. You could either renegotiate your existing home loan with your bank to top up the amount of your existing loan or find another bank that is offering a better interest rate or conditions.
Types of renovation loan
Renovation loans, also known as home improvement loans, are a type of loan that can be used to fund home renovations, repairs, or improvements in Australia. These loans are typically offered by banks, credit unions, and other financial institutions.
There are different types of renovation loans available in Australia, and the terms and conditions can vary depending on the lender and the specific loan product. Here are some common features of renovation loans:
- Loan amount: Renovation loans can range from a few thousand dollars to several hundred thousand dollars, depending on the scope of the renovation project.
- Interest rate: Renovation loans typically have higher interest rates than standard home loans, as they are unsecured loans and carry a higher risk for lenders.
- Repayment term: The repayment term for a renovation loan can vary, but is typically between 1 and 5 years.
- Security: Depending on the lender, a renovation loan may be secured or unsecured. If it is secured, the lender may require the borrower to provide collateral, such as the property being renovated or another asset.
- Eligibility criteria: Lenders may have different eligibility criteria for renovation loans, including credit score, income, and the value of the property being renovated.
Overall, renovation loans can be a useful way to fund home improvements or repairs, but it’s important to carefully consider the terms and conditions before taking out a loan.
Use Prospera Finance to negotiate on your behalf
Let us compare options from the leading lenders and negotiate on the one that really works for you – so you never lose sleep wondering if you missed out on something better. With our expert guidance and answers to your questions, you can feel confident about your decisions.
Should you choose to do business with Prospera Finance you won’t pay us any fees for our services. We will receive a commission on settlement from the lender that provides you with the best-suited loan.
If you are thinking about a renovation, let us help you with the finance side before you start talking to architects and builders and all the fun stuff.