If I want to renovate the property, what are my finance options?
Many people save up to renovate their properties, but this isn’t necessarily going to suit everyone and some will look for financing options through lenders.
If you’re looking to renovate a property and you need financing, you firstly need to understand how extensive that renovation is going to be.
If your investment property purchase requires a significant renovation, including major structural changes, then some form of a construction loan may still be applicable. These loans are often offered as features onto your mortgage.
While many include different features, lenders often allow the loans to be interest-only during the construction phase.
However, if it’s a smaller, less costly renovation you’re considering, there are a few other financing options. If you are willing to hold the property for a period of time while you build equity, then you may be able to refinance and access the equity, or you may be able to take the extra repayments out of an associated redraw with the loan. If you do decide to redraw, your mortgage repayments and interest will increase in line with the amount you take out, so it's worth figuring out what your extra costs will be and chose the option that best suits your situation.
A line of credit may also be an option, allowing you to only pay interest on the funds you use and offering a revolving door of funds. You should also see your expenses itemised. This suits those that will be gradually renovating over the long term or who are undertaking smaller cosmetic renovations.
Other finance options include personal loans and credit cards. Getting a personal loan can help you budget repayments, however once the loan is paid off you will need to reapply, so it makes sense to get the loan right in the first place. If costs blow out, it could be a problem.
Credit cards can be easy to lose track of and often come with substantially higher interest rates.
Ensure you do your sums before committing.
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