Have you considered refinancing to help fund your home renovations?
Home renovation is a great way to increase the value of your property whilst creating a beautiful space to live in. Upgrading your home can cost anything from a few thousand dollars to in excess of hundreds of thousands of dollars depending on your unique project.
Before you start to renovate, take a moment to consider the different options you have for funding. One of the most underutilized ways to finance home renovations is refinancing.
What exactly is refinancing?
Refinancing is when you switch your mortgage from one lender to another. Many Australians use refinancing as a means of getting a better interest rate, accessing different product features or increasing their loan amount. Refinancing is an easy way to increase the size of your loan while finding a lower interest rate.
Keep in mind that your lender may have regulations around what the extra funds you are borrowing will be used for. In most cases your standard mortgage can only be used for cosmetic changes (i.e, painting the walls or upgrading your kitchen) rather than structural changes. For large structural changes most lenders offer ‘construction loan’ packages.
Tips for Refinancing to Renovate
- Know your property value (A little bit of research makes this easy to find quickly online)
- Outstanding loan amount (How much left you have to pay on your home loan)
- Ensure your Loan to Value Ratio is less than 80% (In most cases, if your LVR exceeds 80% you will be required to pay Lenders Mortgage Insurance)
- Do your research, shop around to see if you can find a better rate
- Consider any costs you may incur for switching (mortgage discharge fees, title search charges etc)
- Keep in mind that even the smallest difference in your interest rates could add up to massive savings over the life of your loan.
Benefits of refinancing to renovate
- Get a better interest rate on your home loan
- Increase your loan amount
- Avoid risky finance options like personal loans or credit cards
- Using the existing equity of your house to increase your loan amount
With Australian interest rates currently at an all time low, now is the perfect time to consider refinancing and make the most of your mortgage.
For the best interest rates on the market and to see how much you could save click here.