Six ways to fund a renovation

 

Renovating a home can be time-consuming and a costly project. You may wish to do some minor changes or entirely alter the layout of your home. However, if you don’t have cash readily available, you may wonder how you could fund a renovation. Here are some options which may be able to help you transfer your home from blah to brilliant.

Home equity loan

If you purchased your home a few years ago and with the increase in property prices, chances are you may have built up some equity in your home. By tapping into the equity in your property, you may be able to fund your renovations. Unless you opt to pay mortgage insurance, you will only be able to borrow up to 80% of the value of the property. Therefore, it may be a good idea to speak with a finance broker who will be able to ensure the cost of the improvements aren’t more than the equity you have available.

Construction loan

Similar to an equity loan, although, the bank will take the value of the home after the renovation into consideration. Rather than being given the full loan amount up front, the funds are dispersed at different stages.

Line of credit

Another option is a line of credit, which may be a good choice if you would like access to the funds whenever you need them, as long as the amount is under your limit. The benefit of a line of credit is that you only pay interest on the funds you have used and as you pay off the funds, you can re-borrow the amount without another application. While this option is quite flexible, it is important to make sure you can comfortably make repayments that will reduce the principle.

Homeowner mortgage

If you’ve got plans to upgrade your home completely, then a home loan may be a good option as you can repay the amount over a longer period. You may be able to borrow up to 90 percent of the properties value, and in most cases, the interest rates are much lower than a credit card or personal loan.

Personal loan

If you aren’t making significant changes to your home, you may opt for a personal loan. These loans are normally capped at around $30,000, and the application process is usually straightforward. However, the downfall on these loans is that the interest rates are usually much higher, compared to a home loan.

Credit cards

Credit card interest rates are usually much higher compared to all other loans. However, if the funds are for minimal changes option may be ideal, in particular, is the total interest charged is less than loan establishment costs.

One thing you must do

Plan ahead! Start discussing your plans with a Finance Broker before you start renovating. Make sure you will be able to fund the required work. Also, renovating should add more value to your home than the cost of carrying out the changes. To increase the value to your home, you should think about making changes that appeal to potential buyers; this will help you sell your home quicker and at a higher price.