Many things about home renovation are flexible. You can always change your paint colours or expand your bedroom to give space for your shelves and couches, and one thing is certain- you’re going to need money. All of your renovation ideas will not be possible without cold hard cash….[activecampaign form=7]
Until recently, renovating your home involves borrowing money from the bank, speaking to a loan officer, and hoping for the best deal. But today, you have many options to consider. For instance, a mortgage broker can offer different finance options that suit your personal circumstances.
You might be able to borrow more money than you think by knowing how much money you need, how much you can initially get, and which loan options best match your needs finances. Here’s a rundown on how you can finance your renovation.
It’ll be an advantage for you if you have it, especially for minor projects. But if you have an extensive sum in a managed fund or high-interest investment account, withdrawing it in order to finance your home renovation may not be the best option. There could be penalties for early withdrawal, and loss of compound interest that the money would have earned if not withdrawn. In this case, applying for a loan might actually be cheaper. Speak to a mortgage broker or financial adviser to help you run the numbers.
There are advantages and disadvantages of using your credit card to finance your renovation. On the favourable side, you can pay as much or as little as you can allot each month. Also, if you already have an existing credit card with a high credit limit, you can skip on the waiting for a loan approval. However, there’s always a price for convenience. Interest rates would generally be much higher than with other types of loans. Maxed out credit cards also carry a range of problems, from lowered credit rating to the beginning of a debilitating debt spiral.
A simple option for financing your renovation would be a personal loan. Fixed repayments are withdrawn from your bank account at regular intervals, such as weekly or monthly. If your budget allows, try to arrange weekly payments. Since the repayment total equals the sum of the principal loan and accrued interest, over time weekly payments can reduce this amount much more quickly than a single monthly payment, without costing you a penny more. Personal loans are typically higher interest rate than a home loan however are generally lower than a credit card (however some credit cards can have a very low rate).
Refinancing your existing mortgage allows you to be flexible and extend the payments over a much longer period of time, usually at a lower rate. Costs may include fees on legal and appraisal, and even penalties, which you should weigh in first against the cost of other borrowing options.
A home equity loan is the classic way to finance your home renovation. It provides lower interest rates compared to personal loans and credit cards. However, if you keep depleting your equity, you reduce the amount you will receive if you are considering selling the house. Opt for this loan only for large projects.
Just as you get professional help about your renovation project, see to it that you do the same with your finances. Speak to a mortgage broker or financial adviser to help you understand the most suitable option for your personal circumstances.[activecampaign form=7]
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