Six Ways To Fund A Renovation

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Any renovation project, large or small, can be all-consuming in terms of your energy and money. Here are six loan types that can help you with the financing.

Considering transforming your home from ‘blah’ to ‘brilliant’, but lacking the funds to support your major makeover? Here are a few different home renovation loans to help you turn your dream into a reality.

Whether you want to make a few finishing touches to your home with the help of a paint job or completely turn your home into something special, there’s an option to suit your needs.

 

1 Home equity loan

This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available.

 

2 Construction loan

This is similar to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be given the full loan amount upfront, but in staggered amounts over a period of time.

 

3 Line of credit

This may be ideal for ongoing or long-term renovations. When you apply, you can establish a revolving credit line that you can access whenever you want up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying. However, care must be taken not to get in over your head in terms of serviceability – make sure you can make repayments on the line of credit that will reduce the principle. Read more about Line of credit here

 

4 Homeowner mortgage

If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the value of your home and take advantage of mortgage rates, which are often lower than credit card and personal loan rates.

 

5 Personal loan

If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans.

 

6 Credit cards

This option is only if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project that extra interest might actually total less than loan establishment fees.

 

One thing you should do

There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.

 

Give us a call on 1300 252 088 to discuss which option best suits your requirements

Is it time to fix your rates?

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After many months of fixed rates lower than variable rates, December and early January saw fixed rates start to creep upwards which would suggest that at least the fixed rates have bottomed.

New data has found a growing proportion of borrowers are seeking the security that comes with a fixed rate home loan.

According to the latest national home loan approval data from a leading mortgage broker, fixed rate home loans accounted for 22.04% of all loans written in December, up from 19.51% in the month prior. The fourth consecutive month that has seen fixed rate demand increase.

With speculation mounting that the Reserve Bank of Australia may soon lift the official cash rate, it is clear that a growing proportion of borrowers wish to beat any potential rate hikes by opting for a fixed rate home loan.”

Current market conditions combined with a spate of rate increases by Australia’s lenders before and after Christmas has meant a rate rise by the Reserve Bank this year was now more likely than not.

It is also noted that the Reserve Bank of Australia has stated that the time for easing the monetary policy setting has now passed. All of these factors combined would suggest that a rate increase by the Reserve Bank could be right around the corner.

Borrowers understand this and that is why a growing proportion of mortgage holders are opting for fixed rate products to beat the threat of rising rates. Some are also switching to ‘combo’ products which allow the loan to be split into a fixed and variable component.

At Brickhill Financial Solutions we have access to many fixed rate products from a range of Australian lenders. Please give us a call to discuss your options and find out more.

 

Brickhill Financial Solutions – 1300 252 088

What Do I Need to Know About Debt Consolidation?

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If you’re swamped with credit card debt and personal loans, it can sometimes help to talk to a professional about debt consolidation. However, you need to be wary. You might end up paying more in the long term and/or reduce the equity in your home.

What is debt consolidation?
Debt consolidation is where you transfer your credit card debt and any personal loans to your mortgage. The advantage of doing this is that the interest rate on your home loan is likely to be lower than you’re paying on your smaller debts. You might also benefit from a regular manageable repayment. However, there are some things you need to be aware of.

Debt consolidation is not debt elimination
Since debt consolidation clears the debt from your credit cards, the temptation is to think that you’ve paid off the debt. But you haven’t. You’ve merely transferred the debt to your mortgage. So, once you’ve consolidated your debts, consider snipping your credit cards in two. Otherwise, you could get trapped in a debt spiral.

Remember the 80% LVR threshold
When you took out your mortgage, you might have been under the 80% loan to value ratio, which meant that you didn’t have to pay lenders mortgage insurance. Be careful when you consolidate your debts that you don’t reduce the equity in your home and have to pay lenders mortgage insurance.

Personal loans aren’t tax deductible
Interest charges on an investment loan are tax-deductible but interest on a home loan isn’t. When you consolidate your debts, you need to be mindful of how much interest you can claim as a tax deduction. Seek advice from an accountant or tax agent before making a decision in this area.

Give us a call on 1300 252 088 to find out more.

Should I Refinance?

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Refinancing a mortgage can be daunting. Fees, fixed versus variable interest rates and monthly charges all need to be considered.

The right refinanced loan could help you pay off your mortgage faster and for less, clear unhealthy debt or help you upgrade and add value your home, all of which are steps in the right direction.

My lender is charging me a higher loan rate than I see advertised elsewhere. Can I change lenders?

This is exactly the reason why most people change lenders. There may be a penalty clause in your current home loan, meaning you may need to pay a discharge fee, but it could still be in your financial interests to change.

When shopping around it is always important to look for the comparison rate of a product. A comparison rate is essentially the true rate, taking into account the fees and charges you will pay on the loan. So even though you see a lower rate it doesn’t mean the repayments are less.

We are able to take the hassle out of this for you. We have access to over 1,400 mortgage products from more than 30 lenders.

I have just come off a ‘fixed rate’ or a ‘honeymoon’ interest rate to a much higher rate. Can I move lenders or am I locked into my mortgage?

You can walk away from most mortgages, although penalty fees sometimes apply. To review your options, contact us.

If I move my mortgage to a new lender, is there anything stopping that lender from increasing their rates in a few months’ time?

It depends what kind of product you have. If you’re concerned about rising rates, perhaps you should consider a fixed rate home loan, where repayments are fixed for a period from 1 to 5 years.

Why do some lenders charge more than others for lending the same amount of money?

Banks and other lenders pay different amounts for the money they on-lend to you, they have different overhead structures and different profit expectations. All these factors affect how much they charge to lend people money.

 

To find out more on this and other mortgage related issued please give us a call on 1300 252 088.