Renovation Loans: Maximising your property value
Renovating to add value to your home is a smart move, but it’s important that any work undertaken is affordable from the outset. Home improvements cost money, so the return on investment needs to be substantial enough to cover the initial outlay and still return a healthy profit.
When considering renovations, it’s worth advising your clients to research the types of features prospective buyers are looking for. An awareness of current trends is useful, but changes that will stand the test of time are likely to have a wider appeal.
Extensive overhauls aren’t always necessary and small changes can often make a huge difference. Giving the place a lick of paint, updating light fixtures and installing new floors will add aesthetic appeal without breaking the bank. However, some properties will require more substantial renovations in order to add value. Additional bedrooms and extra storage space will appeal to most buyers, and modernised kitchens, bathrooms and outdoor areas make immediate impact.
Before jumping in head first, it’s crucial to plan out every aspect of the renovation, from affordability to design and execution. There are a number of finance options available to renovators, and before seeking a loan they should consider the amount they need to borrow, existing loan balances, the property’s value and what the type of renovation is being undertaken.
Personal loans are one option, but can be expensive as they often incur high interest rates. However, this avenue of finance may be suitable for smaller renovations. For more substantial works, it may be worth considering a home equity loan. If your client’s existing lending is less than 80% of the value of their property, releasing some of the equity in the home can be cost effective.
If structural changes are being made, homeowners can apply for a construction loan. This is slightly more complicated and requires planning permission. Lenders take into consideration what the property will be worth once renovations are complete, and will need to see a fixed price building contract with plans and specifications for the build.
Whatever decision is made, taking the time to plan and sourcing the right finance deals, as well as the right tradespeople for the job will make the process as smooth as possible.