Renovation Home Loan
More about Renovation Loans
A Renovation Loan enables homeowners to stay in their own home and enjoy an improved lifestyle. It is usually cheaper to renovate
than to buy a another home of the required standard and lose money through selling and moving, due to the fact that house prices have
doubled in Australia over the last 3 years.
Some lenders will secure the loan against a current valuation of your home while others will accept a valuation
based on the value after renovations.
Financing the renovation by redrawing on your existing loan is usually the cheapest option. If you have to increase your existing loan
then there is likely to be a new credit assessment and valuation required, which means additional costs.
Loans used for renovations are typically one of the various forms of Variable Rate Loans (Std Variable or Line of Credit).
One advantage of most variable rate loans is that there is no penalty in paying the loan off quicker by making additional payments.
Less important now that interest rates are rising again is that if there is a reduction in official interest rates, your repayments also reduce.
Other useful features can include offset accounts, a split loan facility, redraw facility, direct salary crediting, portability and repayment options.
Benefits of a Renovation Loan (Variable Rate)
- The redraw facilty means you have easy access to extra funds if required.
- Increasing your repayments above the agreed amount can shorten the term of the loan and save thousands of dollars in interest.
- It is easy to vary the repayment periods to suit your paydays (weekly, fortnightly, monthly etc.)
Tips and strategies
- Avoid loans with monthly account fees
- Making weekly or fortnightly repayments pays your loan off faster than monthly payments because you are making 1 or 2 extra repayments per year
- When interest rates drop retain current repayment levels
- Have your wages paid into your loan account to reduce interest and use the interest free period on a credit card for purchases before paying the credit card bill from the loan account
- Put lump sum payments like tax refunds into your loan account. If required later, use the redraw facility.
Example Rates and Fees
Australian Variable Rate Home Loan NO FEES (July 2008):
- Monthly fee NIL
- Annual fee NIL
- Redraw fee NIL
- Extra Payment fee NIL
- Fixing fee NIL
Low Rate 7.97% std. variable
CCR 8.02%*
*Based on $250,000 Loan over 25 years.
Thank you for visiting our Renovation Loan web-page. We hope the overview has proved useful.
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