If you’re looking for a home renovation loan, Spotter Loans specialises in this area. There are typically a couple of options available which range from using equity in your house to obtaining a personal loan to do the home renovation. Here are some useful tips to keep in mind.
Generally, the cheapest way to obtain your home renovation loan is to refinance your existing mortgage and use some of the equity that’s built up over the years in your house. This strategy generally works best if you can obtain a rate similar (or even better) than your current interest rate.
However, this approach is not always available. For a start, you might not have enough equity in your home to justify a refinance, you typically need a loan to value ratio (LVR) below 80% for this to work. There might also be difficulties obtaining the same rate, perhaps because your credit file has become worse or serviceability is an issue. The loan market has become substantially tougher due to APRA changes and for some customers, serviceability is now tricky. If after refinancing your rate becomes substantially worse, you could find yourself with much higher repayments on the full amount of the home renovation loan, which may not make economic sense. Of course you will have to weigh up the extra repayments vs. the benefits of the renovation. In some cases, you might think it’s worth it, particularly if the renovation is essential.
If you think this option is possible, our parent company, Rate Detective Pty Ltd, works with over 40 lenders and they aim to find you the cheapest home loan renovation rate when you are looking to refinance. Our experienced mortgage broking team can help you navigate through the options. Make an inquiry on this page and mention your wanting to speak to our mortgage broking team.
If refinancing your existing property is going to prove to be too difficult, a personal loan might be available up to $20,000 (and sometimes more) for home renovations. The rate on the loan will vary according to your personal circumstances, which include such things as your credit file, income, expenses and whether you are prepared to use your house (or other asset) as a guarantee against the home renovation loan. The rate on a personal home loan renovation loan is typically higher compared to the option of refinancing your house.
It should also be noted that doing renovations generally increases the value of your property. If refinancing initially was not possible due the equity falling slightly short, in some cases it is possible to refinance post renovation and for that refinance to include paying off the personal loan. Of course, there are no guarantees as it depends on bank valuations. If your relying on a refinance post renovation, it’s a risky strategy. If your budget allows for a personal loan and being able to refinance post renovation should be thought of as a bonus.
Once again if you are looking for a home renovation personal loan then contact us and at the very minimum, we can provide you with some free advice.
Here’s what a loan might look like
Here’s what a small loan might look like…
You’re after a loan for $1,000 for medical or dental bills. Your are looking to repay the loan back after 6 months and are happy to make fortnightly payments.
In the above example You’ll pay:
- Loan Amount Financed: $1,000
- Establishment Fee: $200 (set by NCCP at 20% of the loan amount)
- Monthly Permitted Fee: $40 per month charged on the anniversary of the loan
- Amount of Credit of the Loan: $1,240
- Total Amount of Interest Payable: NIL
- Direct Debit Fees: $25.74 ($0.99 per transaction)
- Total amount of repayments: $1,440.00
- Nominal Percentage Rate (Interest) per annum: 0% as defined by NCCP
Comparison Rate: 160.0571% as defined by NCCP
Here’s what a medium loan might look like…
You’re after a loan for car repairs for $2,500 and are looking to make payments back on a weekly basis over 2 years.
In the above example You’ll pay:
- Loan Amount Financed: $2,500
- Establishment fee: $400 (Set by NCCP)
- Amount of Credit of the Loan: $2,900
- Total Amount of Interest Payable: $1,590.86
- Repayments: 103 x $43.19 + $42.31 (a final payment)
- Total amount of repayments: $4,490.88
- Nominal Percentage Rate (Interest) per annum: 48% as defined by NCCP
Comparison Rate: 65.5138% as defined by NCCP
For loans under $2000 the minimum repayment term 90 days, maximum repayment term 12 months.