Needing to renovate your home? The costs of any renovation project, large or small, can significantly add up. Finding funding for your home renovation in advance can help you prepare and budget for how much renovation you can afford to do. There are numerous ways that you can finance your renovation, depending on the size of your project and your budget.
Home Equity Loan
A home equity loan is the most common way individuals borrow money for home renovations. Equity is the difference between the valuation of your house and the amount you may currently owe on a loan. With this type of loan, you borrow against the current value of your home, before any value adding renovations. Usually you’re able to borrow up to 80% of your home, especially if you own your home outright.
Construction Loan
Designed for those planning to build or complete major renovations in their home. With this type of loan, you receive your loan instalments as you require, allowing you to cover expenses as they occur.
Line of Credit
A popular option for renovators, this method establishes a revolving line of credit that allows you to access the approved amount whenever you’re required. Interest is only paid on balance owed, rather than total amount borrowed. You’re able to pay off the funds and re-borrow as required without needing to re-apply for further amounts.
Personal Loan
If you’re only planning to make a couple of small adjustments to your house, a personal loan (usually capped around $30,000), may be suitable. However, interest rates on personal loans are higher than home equity loans but lower interest rates compared to credit cards.
When choosing between the different funding options available, it pays to enlist the help of a broker who can explain and find the most suitable option for your project and financial situation.