Interior designing is an extensive, complicated and lengthy process. Therefore, if you want to renovate your old house or decorate a new one you might want to hire a professional to help you get the attractive deals within a cost effective budget; however having said that renovating is no easy task, not to mention an expensive endeavor. Renovating involves a huge list of things that has to be re done which might include the plumbing, changing the attic insulator, putting in new furniture, changing the wall colors and textures, removing the old wiring system and installing a new one. Therefore, it is a hectic and time consuming prospect which will definitely require a huge amount of money. This is exactly where people start wondering if they should just buy a new house instead of renovating the old one because many a time’s renovation costs trumps purchasing costs. It also happens that a lot of homeowners are faced with the dilemma where they have to decide between selling the old house and purchasing a new one just to avoid the challenges of a full house renovation. This is a challenge many homeowners of Australia face every day. Therefore there is an easy way to decide whether to sell or to renovate. You should only renovate your house when:
1. The renovations will increase the value of the house.
2. The renovations will enhance the standard of living.
3. The renovations will help conduct emergency repairs or full home extensions.
Q 1. Do lender or credit providers impose restrictions on the type of renovation?
Ans: Usually the lender or credit provider will not impose restrictions on any type of renovation. Most of them will let you borrow funds for carrying out your renovation project only if it adds value to your house. Therefore, they usually let you borrow money for the following renovation projects:
a. Adding another bedroom or guest room.
b. Re-doing your kitchen or bathroom.
c. Add a pergola, arbor or trellis outside the house in the recreational area.
d. Installing a swimming pool.
e. Extending the garage from a single one to a double.
f. Constructing a secondary dwelling area along with the primary one.
g. Adding any other structural or non structural construction.
Q 2. What methods of finance can you choose?
Ans: There are various finance methods available if you want to renovate your house. Here is a list of the methods available to finance home renovation:
Home Equity Loan:
This financing arrangement is probably the most common one in Australia with regards to home renovations. This process involves taking a loan against the value of your home. The following example will help you understand the process better:
Assume the value of your home to be $700,000 and your mortgage loan to be about $300,000, therefore from the difference which is $400,000 you can use that equity to fund the renovation project of your home.
The recent property price hike in Australia has helped people use their equity to undergo extensive renovation projects. This also reduces the chances of going digging into cash reserves.
This particular finance option is suitable for you provided:
a. You do not have equity available in your home.
b. You only have minor renovations to be done, nothing extensive.
If you elect for a short – term personal loan, you will find that:
a. Personal loan interest rate is much higher than the home equity loan
b. The amount which can be borrowed is limited. The amount usually ranges between $500- $50,000 approximately.
Construction loan is only available when you need to conduct extensive construction projects which require the permission of the council and a licensed builder. The credit provider will then impose the following restrictions on your project:
a. The lender will not provide the full amount upfront to you.
b. The lender will only pay in stages as the renovation progresses.
Q 3. Can you afford to rebuild my home if it was destroyed?
Ans: You should always have home and building insurance and you need to think of increasing the amount to cover home renovation projects. However, if your home is completely destroyed due to fire or by any other natural causes then you should start asking the following questions:
a. Do I have insurance cover
b. In case you have building insurance, then:
1. Is the amount enough?
2. What does your building insurance cover?
3. Does it include Total Replacement cover or Sum insured cover?
Do not delay and take required actions:
If renovation is what you require then hurry up and seek the aid of an expert home finance broker who can help you by providing various financing plans related to renovation. He will help you select the correct finance plan and also help you set your budget for the renovation project.