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If you own a house or are thinking about buying one, you might be dreaming of renovations you’d like to make to it.
Maybe you want a new kitchen, or the bathroom needs an update. Maybe the wallpaper hasn’t been touched since 1973.
While lots of people have big ideas when it comes to what they’d like to do, they might not always have the cash available to make it happen. That’s where a home renovation loan can help.
What is a home renovation loan?
A home renovation loan is a loan taken out for the purpose of getting renovation work done.
It’s usually for a much shorter term than a home loan, and might be more specific in scope than some personal loans.
Types of home renovation loans
There are a few ways you can get a loan for home renovations.
If you’re planning a large project, you might qualify for a construction loan from a bank. Or if you have equity in your property, you might be able to use that to borrow the money for the work you need to do.
But in other cases, you might opt for a personal loan, which the team from better finance™️ can help you with.
This could be secured or unsecured.
A secured loan means the lender registers an interest over an asset you own, which you offer as security. This means that if, for example, you offer your car as security, the lender has the right to sell the car to recover the debt if you’re unable to repay the loan. An unsecured loan is provided without that security for the lender, and may have a higher interest rate as a result.
How do home renovation loans work?
The information that a lender will consider when you apply for a loan for home renovations is similar to that of other types of loans.
The lender will take into account:
Your credit score
Generally, the higher your score, the more confident a lender can be in lending you the money.
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Your income stability
The lender needs to know that you can afford to pay back any loan you take.
Security value
If you're using your car as security for a loan, the lender will assess its current market value to determine how much they’re willing to lend, based on their lending criteria.
Application process
If you choose to apply for a loan for your home renovations through better finance™️, we’ll help you get the documentation you need together at the outset. That might include information such as your proof of income and other debts you may have.
We’ll then help you find a lender who is a good fit for your needs. Our online loan approval process is quick and easy.
Loan disbursement
Unlike a construction loan, where you might receive your loan as a series of payments, if you apply for a personal loan for your home renovation, you’ll receive the full amount upfront.
Benefits of a home renovation loan
A home renovation loan can be a suitable choice for lots of people.
Value
Renovation work can sometimes improve property value, which could help you now and if you decide to sell the property in future.
Fit
You could use the work to customise the living space to meet your needs, which can sometimes be a more cost-effective option than moving to a new home.
Cashflow
A loan allows you to spread the cost of renovations over a period of time, instead of needing to save the money before being able to make those changes.
Things to consider before taking a home renovation loan
There are a few things to think about before you dive in.
What are your goals and budget?
It’s helpful to have a good idea before you start how much you can afford to pay, and what renovation work is most important to you. This can help you determine how much you might need to borrow.
It might be useful to add some leeway into your budget and the amount of lending you apply for, in case there are unexpected costs as your project progresses.
If you have your budget right at the outset, it will mean you can avoid any potential delay and possible additional application costs that could be involved in extending your loan later on.
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What is the total cost of borrowing?
You’ll pay interest on the amount you borrow, and there will probably be fees, too. We can help you understand what this will look like in your situation.
What can you afford to repay?
Lenders won’t lend you more than they assess you can repay, but it’s important that you are comfortable with the repayments you’re considering, too. Our calculator could be a good first step to work out what those repayments might look like.
What are your options?
The team at better finance™️ can talk to you about which lenders could be a good fit and why.
Common mistakes to avoid
There are a few key things that can catch you out when you embark on this sort of project.
Borrowing (and spending) more than you need
It’s easy to get swept up in the fun and dreams of planning a renovation project. But keep checking in with your budget to make sure you’re sticking to what you initially expected to spend.
Not having a clear plan
On a related note, it’s important to have a clear plan from the outset. This way, you can work through what your priorities are and carefully research your options.
Not understanding your loan
At better finance™️, we’ll work with you to make sure you fully understand any loan you sign up for. We can talk you through the interest rates available and the repayment terms that might apply.
Seek financial advice
We’re an expert team, here to offer you any advice you might need. Whatever your questions, we’re here to help.
Ready to get started?
The better finance™️ team is here to help you get underway with your renovation project. Get in touch with us and we’ll show you what might be possible with our quick, straightforward online process.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.