Looking for Construction Home Loans or Home Improvement Loans?
Renovations are often more challenging than standard home loans unless you have Loanscope Mortgage Brokers in your corner. They are not a typical financial product, and many people who investigate them throw up their hands when they see the application and lending criteria.
Loanscope has access to a vast range of renovation home loans for investment properties, first-home buyers or as part of the refinancing home loan process. If you are a doctor or in the medical field, we can also help with specialist doctor home loans. We take care of all of the tedious paperwork so that you can concentrate on the fun stuff, like choosing the paint. Your renovation loan could either pay for upgrades to your existing home or help you improve a property that has plenty of potential but needs a bit of love.
Using existing equity or redrawing for your renovations
When considering financing options for your renovations, you have two main choices: using existing equity or redrawing the funds.
Using existing equity means tapping into the value of your property that you already own. This can be done through options like a home equity loan or line of credit. With this approach, you borrow against the equity you have built up in your property and use the funds for renovations.
On the other hand, redrawing refers to accessing the funds you have already paid into your mortgage. If you have made extra payments on your mortgage or have a redraw facility available, you can withdraw those funds for your renovation needs.
Which option is best depends on factors such as your financial situation, interest rates, repayment terms, and the amount of equity you have in your property. It’s recommended to consult with a financial advisor or mortgage specialist to determine the best course of action based on your specific circumstances.
If the renovations you are planning are not structural, you may be able to use your existing equity to top up your home loan so you can borrow additional funds without taking out a separate loan. If you’ve ever made extra repayments on your home loan, another option is to redraw those funds for your renovations potentially. Not all home loan products have a redraw facility, but Loanscope can determine whether it’s an option for you.
If your renovations are structural, you must have a building contract. We will then be able to complete a valuation of the finished product, which should give you access to more equity. The chosen bank will then pay the builder in progress payment as the project gets completed. This is much more involved and time-consuming than accessing your equity for new flooring and a coat of paint. It is essential to assess the viability of the project in your location; if you were to overcapitalise, then you could run the risk of the “as if complete” valuation coming up short. For example, if the average property price in your suburb is $750,000 and the top prices are below $1,100,000, spending $750,000 in renovations on your property, already worth $850,000, is unlikely to improve its value to $1,600,000. It might even pay to talk to your local real estate agent to evaluate the likelihood of the added value to your property. Renovations, if well planned, may add more value than you are spending.
Lines of credit for your renovations
A line of credit may be the solution you have been looking for to help finance your renovations, particularly smaller ones. Lines of credit allow you to withdraw funds from your home loan up to an agreed limit or to increase your home loan balance and access more funds. Interest is charged on the balance owed, not the total loan amount. Lines of credit can be complex to set up, so it’s best to go through a home loan specialist like Loanscope.
Refinancing as part of your home renovations
If you upgrade your property, it may also be time to upgrade your home loan to factor in the renovation costs. Loanscope compares the home loans of more than 30 different lenders to find the right one for you. Your current lender might not be willing to offer you the same rate as another one more eager for your business. We are all aware of the loyalty tax that banks charge. The longer you stay with your bank, the less likely your bank thinks you are likely to move; they do become greedy on the margin they think they can get away with.