Renovation does add value to the property that is why many people decide to upgrade their house. But a renovation project doesn’t always have to be big – it really can be anything from upgrading a kitchen or installing a pool, to building a granny flat.
You have two main options if you choose to finance through a lender:
- A personal loan – which is unsecured
- Mortgage finance – secured on the property
A personal loan can be a good option for small renovation projects, such as fitting a pool, where the cost is fixed in advance. You can pay off the balance earlier than you would by adding extra to your mortgage – typical personal loan terms are three to five years. And, with a personal loan, you’ll have fixed regular repayments enabling you to build in the cost to your budgeting. But on the downside a personal loan can attract a higher interest rate than a mortgage and the qualifying criteria can be stricter.
You can finance your renovation project through a mortgage, in two ways. The first is releasing equity you have in your home and the second is taking out a new loan.
You’ll have equity if your property is worth than you paid for it, or because you’ve paid down a good chunk of the existing loan. The equity acts as a security and your existing lender tops up your loan.
The other option is to refinance your entire loan with a new lender. The new loan amount would cover your existing loan and the cost of your renovation project. As a bonus, you could end up getting a lower interest rate. Because Loan Market brokers work with over 30 lenders, they know how much each lender will be prepared to lend you, based on your circumstances.