While most home renovations are funded by refinancing the mortgage, a smart way to do it is to look at a personal loan as it can offer the borrower more flexibility.
Aussie Rockhampton franchisee Brendan Ryan said when it comes to a refinance, many lenders will want to see quotes and council approved plans before they will lend the borrower more on the mortgage.
“By using a personal loan, some of these hurdles may be avoided as the transaction is with a separate lender to the mortgage,” he said.
“Refinancing a mortgage can take up to six weeks at the moment, while a personal loan will be approved in hours or days which is great for people who want to take advantage of any specials which maybe advertised, such as pools, sheds or kitchen and bathroom packages.”
Mr Ryan said one of the main reasons a personal loan was a smart alternative to refinancing, was the short-term debt versus a long-term debt argument.
“Using equity to fund a renovation is not silly, as it adds value to the home,” he said. “However, adding the amount to the home loan and then paying it back over 30 years can mean that your new kitchen costs a lot more than paying it off over a shorter period.”
“While the interest on a personal loan may be higher, you pay off the renovation much faster, so ultimately it could cost you much less.”
When it comes to renovating are you one for rolling up your sleeves and doing it yourself or do you prefer to hire someone to do the work for you? If you have any experience with renovating please post a comment below!
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