Tips for renovating your home this new year

Tips for renovating your home this new year

Taking some time off over the Christmas and new year holidays? Maybe you could use this time to actually follow through on those plans you’ve had for ages to renovate or fix up your home. Whether you’re looking to increase your property’s value, or improve your own quality of life, here are a few general tips to consider when you’re looking into renovating.

Fix existing problems before making new changes

While you may be keen on renovating to make some big sweeping changes to your property, pre-existing problems such as leaks, rising damp, or termites could risk undoing all of your hard work.

Consider checking for any problems with your property’s electricity, plumbing, or structure, and fixing these underlying issues first before you move on to the fun stuff.

Little changes can make a big difference

Whether you’re fixing up your property to improve your standard of living, or if you’re renovating the place to sell or rent out as an investment, you don’t always have to spend a lot to see a big difference.

Something as simple as a lick of fresh paint can freshen up a tired looking property, inside and out. Other small adjustments could be to update the home’s fittings, from taps to lights and even light switches. You could also look into sprucing up the garden, or replacing old built-in appliances with new models.

Some small jobs you may be able to do yourself, while others may be best handled by a professional tradie, such as a plumber or electrician.

Try to avoid overcapitalising

They say you have to spend money to make money, but this advice has its limits if you’re renovating to sell. Putting too much money (capital) into a property could put you at risk of having nothing to show for it come auction day. For example, you could spend $200,000 on renovations that only add $100,000 to the property’s value, effectively leaving you out of pocket.

Do your research into what kind of renovations potential buyers are likely to want to see, and consider whether an improvement is realistically likely to offer value before you take the plunge. Comparing the value of your property to the recent sale prices of similarly-renovated properties in the area could give you a benchmark for setting your renovation budget.

Get the right type of finance for the job

If you don’t have fat stacks of cash available in your savings account for a rainy day, you may want to consider different finance options to help fund your renovation project. Your best option may depend on the reno work you’re planning, as well as your own financial situation.

  • If you have a set renovation budget in mind, you could consider a personal loan. This could let you borrow the money you need as a lump sum, to be repaid with interest over a set term. You may not be able to easily borrow extra money, but this could actually help to prevent your reno budget from blowing out.
  • If you’ve been making extra repayments onto your home loan, your lender may offer the option to redraw this extra money to cover your reno costs, Of course, this would mean you’d no longer be ahead on your home loan, which could affect the interest you’ll pay in the long term.
  • If you have equity available in your home loan, you may be able to refinance your mortgage to borrow the extra money you need as a lump sum, though this would mean paying interest on your reno budget for the rest of your loan term. If you’re unsure what your reno budget may be, you may be able to opt for a mortgage that offers a flexible line of credit, which works a lot like a credit card with a limit based on the equity in your property.
  • If your renovation plans are ambitious enough to be considered a building project, you may be in the market for a construction loan. These specialised mortgages don’t pay you a lump sum when you apply, but allow you to draw down money in stages as the project progresses, and only pay interest on what you’ve drawn down so far. Construction loans can be complex, requiring multiple property valuations over the course of the building project, so make sure you’re familiar with the lender’s requirements before you apply.  

Get professional help

While you can often Do It Yourself for smaller jobs around the house, major renovations typically require specialist skills. Get quotes from professional builders and tradies, and consider contacting architects or interior designers for more complex projects. Construction loans may require the work to be carried out by licensed and insured builders, rather than as an owner-builder.

Similarly, when it comes to sorting out your reno finance, you may want to consult a mortgage broker or financial adviser to work out what options may be right for your situation. They may be able to find out if you’re eligible for any extra support or incentives, such as the government’s HomeBuilder grant. Plus, a broker can help manage your finance application, minimising any paperwork-related headaches so you can concentrate on your project.

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Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

Can I get a home renovation loan with bad credit?

If you're looking for funds to pay for repairs or renovations to your home, but you have a low credit score, you need to carefully consider your options. If you already have a mortgage, a good starting point is to check whether you can redraw money from that. You could also consider applying for a new home loan. 

Before taking out a new loan, it’s good to note that lenders are likely to charge higher interest rates on home repair loans for bad credit customers. Alternatively, they may be willing to lend you a smaller amount than a standard loan. You may also face some challenges with getting your home renovation loan application approved. If you do run into trouble, you can speak to your lender and ask whether they would be willing to approve your application if you have a guarantor or co-signer. You should also explain the reasons behind your bad credit rating and the steps that you’re taking to improve it. 

Consulting a financial advisor or mortgage broker can help you understand your options and make the right choice.

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

How can I qualify for a joint home loan if my partner has bad credit?

As a couple, it's entirely possible that the credit scores of you and your partner could affect your financial future, especially if you apply for a joint home loan. When applying for a joint home loan, if one has bad credit, there may be steps that can help you to qualify even with bad credit, including:

  • Saving for a higher deposit, ideally 20 per cent or more. Keep in mind:  a borrowed amount of less than 80 per cent of the property value also saves the cost of Lender's Mortgage Insurance (LMI).
  • Consistent employment records, regular savings habits, and an economical lifestyle can help prove financial stability and responsibility. These can improve your chances of approval even if there are some negative marks on a credit report.
  • Delaying your decision to buy a property until your partner’s credit score improves. Alternatively, you may want to consider a solo application.

While these tips may assist, if you find this overwhelming, consider consulting an expert advisor who can offer personal guidance based on your financial situation.

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

What is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.