Thinking about renovating?
Renovating is not only a way of making a space nicer to look at, it can also greatly affect the value of your home.
While the cost of renovating will vary depending on the type and amount of work that is needed to be completed there are many options for accessing funds. One such way is to access the equity in your home.
Equity is the difference from the amount owing on your mortgage and the value of your property. Accessing the equity can be quite straight forward and is generally the least taxing on your cash flow week to week as the repayments are made over a longer period. Things like kitchens, bathrooms and any other cosmetic renovations are easily financed using equity and you get full access to the funds up front.
If you’re thinking bigger, perhaps an extension or second storey, the equity in your home may not be enough to cover the cost and even if it is a bank will want to give you a construction loan to complete the work. A construction loan differs from your standard mortgage in the way that most banks will only allow you to make the interest payments on the money lent and the money is lent in what is called progress payments. At different milestones through construction your builder will lodge for progress payments as progress is made, it is that simple. You only pay interest on the amount the bank has given the builder as the build progresses as opposed to the whole amount.
The other positive about construction loans when working on a house you already own is the bank will value your property based on the end value once construction has been completed. If you’re adding rooms to a house it will usually attract an increase in value so this is a very handy tool when negotiating rates.