There could be many reasons why you would want to renovate your home. However, these projects can be expensive. Can you get a personal loan for home renovation? The answer is yes, you can. They are one of the most popular options to fund your renovation project, which you otherwise couldn’t afford.
In this blog, we discuss renovation loans, their different variants, and the process of applying for these mortgage products.
What is a renovation loan?
Home renovation loans are special financial products to upgrade or enhance your property. This line of credit can cover the costs of remodelling and renovation.
Types of Home Renovation Loans
There are different types of property upgrade mortgages, like construction or personal loans, at varying interest rates. Here are some of the popular options available:
Construction Renovation Loans:
If you plan on adding an extension or rebuilding your property, this loan can help you. In this financing option, you receive the money in “progressive drawdown” or stages as the renovation project continues. Ideally, you pay the interest on the funds drawn instead of the whole loan amount and save money.
Refinance Home Loan:
Another popular option is mortgage refinancing. With this financial product, you can use the existing equity on your home to take a new loan. It means you can convert the house’s existing equity to refinance a home loan. It lets you renegotiate loan terms, switch lenders or reduce the interest rate while increasing the duration of the mortgage.
Personal Loan for a Renovation:
This home improvement loan is easy to secure and preferred by property owners for small-scale projects. You can either opt for an unsecured or secured option, with a fixed or variable interest rate.
Redraw on Your Existing Home Loan:
A redraw facility lets you withdraw extra funds you have paid on your existing mortgage. With this option, you can access extra cash without taking on a new loan. However, keep a note that the redraw facility is not available on all loans. You need to talk to your mortgage agent to know more.
Home Equity Loan:
This debt product allows you to borrow money against your property’s current equity. Although it sounds similar to a home loan refinancing, there is a big difference between the two. Also known as a second mortgage, in a home equity loan, you can receive a lump sum fund upfront. The amount is decided based on the difference between the value of your property and the mortgage you have paid. These loans usually come with fixed interest rates with set monthly payments.
How to Apply for a Home Renovation Loan?
After you have chosen your preferred loan product, it's time to apply for the same. Underneath, we have listed the process to apply for home renovation financing:
Know Your Budget:
Before applying, get an estimate of the total renovation cost. It’s essential to include materials, labour, permits, and other unexpected expenses in the budget. This will help you determine the loan amount you need.
Research and Choose a Lender:
The eligibility criteria and the final mortgage amount can vary from lender to lender. Therefore, when searching for a home renovation loan, take time to research accordingly. You can choose a home loan expert specialising in renovation or personal mortgages for the job. Also, there are some common eligibility criteria for someone to borrow money for property improvement.
Complete the Loan Application:
Each lender has a separate process, but it often involves filling out a form with your details. It may require your personal information, employment details, income verification, and desired loan amount.
Gather Required Documents:
You’ll have to collect documents for proof of identity (ID), proof of address, income tax returns, recent pay stubs, and bank statements. The lender may also ask for property ownership documents and renovation estimates.
Submit Your Application:
Once you have completed the form and gathered the documents, submit your application to the lender. They may have an online portal or require documents to be mailed or faxed.
Loan Processing:
The lender will verify your information, assess your creditworthiness and/or appraise the property.
Loan Offer:
If approved, you receive a loan offer outlining the interest rate, loan term, monthly payment and any other fees. Carefully review the terms before accepting.
Loan Signing and Disbursement:
Sign loan agreements once you accept the offer. The loan amount may be disbursed directly to you or your contractor, depending on the policy document.
Contact Our Home Loan Experts at Mortgage Friend!
If home renovation is in your mind, start with setting up a budget and sorting your finances. Also, to apply for a personal loan or other assistance, feel free to reach out to Mortgage Friend. Our experience in managing loans will prove helpful in finding better deals.
You can talk to us about what type of loan is more suitable to maintain your financial health. Additionally, we can assist you through the paperwork and other formalities. To know more, you can call us on 0407 949 044 or email us at jkassoc@arc.net.au. Our services are available throughout Melbourne, Victoria.
