This article will explain why sometimes it doesn’t pay you to wait to apply for a Renovation Loan.
Please read on to discover why a lot of Australians are getting on with the job of renovating their home sooner, rather than later.
What is a renovation loan?
The purpose of a renovation loan is when a bank agrees to fund alterations and improvements to a home. Also known as remodelling, home improvement, home renovation and refurbishment loans, these loans are designed to assist you in completing the project, in order for you to enjoy the benefits whilst you are paying off the loan.
Depending on the size of the renovation, and the lender that we approach for finance, the lender may choose to call this a construction loan. It is called a construction loan simply because the lender will want to be in charge of the funding, as it is needed. Please see our Info page, Construction Loan for much more detailed information in relation to this type of loan. Please feel free to call a mortgage broker at Illawarra Mortgage Brokers to discuss your options in detail.
Why wait to renovate?
We have met many clients over the past 16 years, who have applied to refinance their homes to a more competitive lender, in order to save money. We have found that these same clients had a desire to pay a little bit off the home loan, with the purpose of redrawing to complete some remodelling or renovation work on the home. They had decided it would be better to wait, save some money, and then redraw the money to pay for these home improvements. Maybe it would be better not to wait.
What are the pros and cons of a Renovation Loan?
You can find out the pros and cons of a Renovation Loan by visiting our Construction Loan page. The information on our Construction loan page is more detailed, and covers both Renovation and Construction lending.
Cost versus Comfort
It would pay most people to look at the option of funding their renovation sooner rather than later. This will allow them to enjoy the benefits of the renovation, whilst they are paying their loan, and in some cases without adding a lot to their monthly repayments.
The reason that we say this, is covered in the points below:
- We need to calculate the difference between the loan that you are in now, and the loan that you would receive after refinancing to a more competitive lender with cheaper rates. You may be able to fund your renovation costs and still be paying a similar amount to what you are paying now.
- We also need to calculate the cost effectiveness of consolidating your other smaller debts into the home loan if you have any. This, in addition to interest savings from your refinance, can reduce your monthly payments quite substantially, allowing you to cope better with the added funds of the renovation.
- Once the renovations are complete, you will more than likely have increased the value of your property. This may allow you to consolidate other debts that previously could not be consolidated at the time of application.
As you can see by the points above, you can see that savings can be made in several areas. Surely it would be nice to have your home exactly the way you want it whilst you are paying your loan down?
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Please see our Info page, Construction Loan for much more detailed information in relation to this type of loan. Feel free to call a mortgage consultant at Illawarra Mortgage Brokers to discuss your options in detail. You can reach a Mortgage Broker on 0242 575 626.