How to Finance Your Home Renovation

Renovating your property is one of the best ways to increase its value, but it doesn’t come cheap. As a homeowner, it can be tough to save enough cash for a renovation while managing your mortgage and other expenses. That’s why many people turn to financing options to fund their home improvement dreams.

If you’re considering ways to finance your renovations, here are some of the best options to explore.

Savings

Depending on your financial situation, using your savings could be a great way to fund your renovations. If your home loan has a redraw facility or an offset account, you can use these features to make your savings work for you by reducing your interest repayments.

• Redraw Facility: Make extra contributions beyond your minimum loan repayments. You can withdraw these extra funds when you need them for renovations.

• Offset Account: A transaction account linked to your home loan. The balance in this account offsets your loan amount, reducing the interest you pay. You can access these funds anytime, just like a regular bank account.

Home Equity

If you’ve owned your home for a while, you’ve likely built-up equity — the difference between your home’s value and your remaining loan balance. You can use this equity to finance your renovations through options like cash out loans or a line of credit.

Cash Out Loans

A cash out loan (also called a home equity loan) allows you to tap into your equity and receive a lump sum. This increases the balance of your existing mortgage, giving you immediate access to funds.

Line of Credit

A line of credit works like a credit card. Instead of receiving a lump sum, you can borrow as needed up to an approved limit and only pay interest on the amount you use.

Refinancing

If you don’t have a redraw facility or can’t access a mortgage top-up, refinancing could be a useful option. Refinancing means replacing your current home loan with a new one, potentially with better terms or a higher loan amount to fund your renovations.

Refinancing gives you the opportunity to:

• Access your home equity.

• Secure a better interest rate or loan features that suit your needs.

A Castell Home Lending Specialist can help you explore your refinancing options and find a loan that aligns with your goals.

Renovation Loan

A renovation loan (or remodel loan) is specifically designed to finance home improvements. These loans let you spread the cost of renovations over time, so you don’t need to dip into your savings all at once.

Construction Loan

For larger renovation projects, a construction loan may be ideal. Unlike standard loans, construction loans are paid out in instalments that align with each stage of your project. You’ll only pay interest on the funds you’ve drawn, helping you manage your cash flow.

Personal Loan

If you don’t have enough equity or aren’t ready to refinance, a personal loan can cover smaller renovation projects. Personal loans typically range from $4,000 to $50,000. Keep in mind that personal loans usually have higher interest rates compared to home loans or construction loans.

What Are the Benefits of Renovating?

Renovating offers a range of benefits, including:

• Increasing Home Value: Upgrades to kitchens, bathrooms, or living spaces can significantly boost your property’s market value.

• Enhancing Comfort and Functionality: Extra bedrooms, bathrooms, or multipurpose spaces can make daily life more convenient and enjoyable.

• Personalising Your Space: Renovations let you customise your home to better match your lifestyle and taste.

• Fixing Existing Issues: Address structural, plumbing, or electrical problems to prevent costly repairs in the future.

• Boosting Home Equity: Renovations can help you build equity faster, providing financial flexibility for future investments.

• Investment Property Benefits: If you’re renovating a rental property, you may be eligible for capital works tax deductions.

Financing your renovation doesn’t have to be overwhelming. Castell is here to help you find the best solution, so you can enhance your home and maximise your investment.