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Which loan – small scale vs large scale renovations

September 24th, 2015 / No Comments /

Home renovation reality TV programs have no doubt inspired us all to knock down a wall and reveal the vast open plan living space that awaits, however there is that matter requiring just as much enthusiasm that most people find a little less aesthetically pleasing – finding the finance.

If your renovations are of a larger scale and involve extensions to your property, you may need a construction loan.

The scale of your renovation project will significantly influence the type of facility you need to finance it. A poor choice of home loan will frustrate you more than poorly hung artwork or contractors that don’t turn up.

For example, if your renovations are more of a cosmetic makeover with no major works involved, you may be able to consider the following to get the job done:

  • Redrawing any excess funds from your existing home loan
  • Applying for an unsecured personal loan
  • Applying for a limit increase on your existing home loan
  • Applying for a split facility (secured loan or line of credit).
    Planning your renovations in line with a realistic budget is an essential step before you can decide what facility you are likely to need. Just as you wouldn’t impulse buy on your new kitchen, don’t do it on your home loan either.

If your renovations are of a larger scale and involve extensions to your property, you may need a construction loan. The advantages of going down this path, is that the value of your property can be assessed on the likely value upon completion of the project, rather than being limited by what you can borrow based on its existing value. This gives you more equity and thereby more borrowing power so you may be able to have the renovation you really want.

For this type of loan, you do require a fixed-price building contract for the project. Funds are released in conjunction with building stages. Because of this, you are probably less likely to overspend, as the contract process requires a lot of the decisions made upfront rather than deciding as you go without a strict plan.

One thing’s for sure, while you decide if you’re walls are going to be warm nutmeg or magnolia, you can leave it to us to research your finance options. We’ll make sure your loan doesn’t clash with your requirements and objectives and is accessorised appropriately to suit your situation.

This article is general information only, and is not advice. You should not rely on it as advice. We recommend you speak with a credit licensee or authorised credit representative, licensed financial service provider, registered accountant or tax practitioner, or lawyer for any credit, financial, tax, or legal advice.

Which loan – small scale vs large scale renovations

Home renovation reality TV programs have no doubt inspired us all to knock down a wall and reveal the vast open plan living space that awaits, however there is that matter requiring just as much enthusiasm that most people find a little less aesthetically pleasing – finding the finance. If your renovations are of a […]

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