To say that Australians are big on home improvements is an understatement, with the total value of approved home remodeling projects surpassing $1 billion per month in 2021.
Most Australians are spending more money on creating better work-from-home environments. The focus is to make home improvements that lead to more private, quiet, and modern workspaces at home.
So, where are homeowners getting the money needed for home renovations? It’s no secret that these projects can be expensive, with major remodels capable of setting a homeowner back more than $300,000. Minor projects can cost as much as $20,000.
Many homeowners are turning to renovation loans for financial assistance when doing home upgrades. Why?
Read on to learn more.
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No Collateral Required
One of the biggest challenges that many borrowers face when looking for financing is the lack of collateral. Secured loans require you to have assets as security for repayment of the amount borrowed. In the event of a default, you have to forfeit the asset.
Thankfully, home renovation loans are unsecured. That means that the loan doesn’t require any form of collateral. If, for any reason, you’re unable to make payments, your property won’t be at risk.
The trade-off is that the interest rates are typically higher with unsecured loans, but that’s a small price to pay compared to having your home foreclosed in the event of a default.
Note that your credit score will get a massive hit if you don’t repay the loan, so you need to do your best to make payments.
Simple Application Process
When applying for a home renovation loan, you’ll be pleasantly surprised by how easy and straightforward the process is. This is especially the case for borrowers with good credit. Generally, the lender will want to see proof of employment or income, besides your credit score.
The amount of paperwork required is also significantly less compared to other types of loans, especially if you already have a home loan from the same lender. Less paperwork shortens the amount of time the entire application process takes.
Fast Disbursement of Funds
Another benefit of home renovation loans is that funds are usually disbursed quickly. For instance, a Plenti Renovation Loan ensures that you have money in your account within two days of getting approved.
Getting funds as quickly as possible is beneficial in many ways. It ensures that there are no delays in getting your project started, which can save you money in the long run. And where the renovation is an emergency, quick cash allows you to get the issue fixed as soon as possible, so your family gets back to normal life.
There are different forms of home renovation financing from which borrowers can choose. You can opt for a home equity loan (HEL), home line of credit (HELOC), or mortgage refinancing.
Borrowers can also choose a loan term that suits their budget and project. For instance, if you’re looking for financing for a one-time home remodeling project, then an equity loan with a term of 1 to 5 years may suit you best. A home line of credit can offer even greater flexibility, allowing you to borrow the money you need without having to reapply for credit.
Home renovation loans also allow you great flexibility when it comes to how you can use the funds. Whether you want to add a room to your home or need to make a new balcony, a home renovation loan has got you covered. Simply put, you’re free to use a home renovation project on just about any home remodel you wish.
Helps Build Home Equity
A home improvement loan can help you make home maintenance and upgrade changes that help enhance your property’s value. If the projects are done strategically, the value of your home may increase so much that the loan pays for itself over time.
One of the advantages of building equity is that, in the future, you’ll be able to borrow against the value of your property. When that time comes, you’ll be able to enjoy even more favorable loan terms, such as friendlier interest rates.
What to Consider When Applying for a Home Improvement Loan
Now that you’ve seen the clear benefits of home improvement loans, you may want to apply for one soon. To get the most out of this type of financing, there are certain things you need to consider.
First, it’s essential that you evaluate the actual benefits of the project you’re about to embark on. How much value will the renovation add to your property? Will it save you money in terms of energy consumption, or will it make your home more attractive to potential buyers when the time to resell your home comes?
Next, consider your eligibility. Generally, lenders will want to work with borrowers who have good credit and have a steady income. If you fall short on these criteria, you may want to work on them first before applying for the loan.
Thirdly, determine what type of home improvement loan works best for you. If looking for quick funding, for instance, a personal loan may be the best option.
Don’t forget to determine the cost of your renovation project. This way, you know what amount to apply for.
Use a Home Renovation Loan to Finance Your Home Improvements
As a homeowner, it’s only natural to want to make home improvements that enhance your home’s value, functionality, and appearance. Paying for these projects out of pocket is not always practical. Thankfully, you can always apply for a home improvement project to fund the projects on your mind.
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