MAINTAINING A HOME
Financing a renovation: What are your options?
6 August 2020
Is your home in need of a little attention? Maybe your spare bedroom seems a little lacklustre, or your kitchen needs a makeover. Whatever it is, now could be the right time for a home renovation. So, how are you going to fund it?
Increase your home loan
Increasing your home loan with an ‘Add’ or ‘Equity’ Loan can help you access additional funds for your renovation. You could also use equity to consolidate debts which could help you save money over time to contribute towards a renovation. The minimum borrowing amount for ‘Add’ and ‘Equity’ loans is $10,000.
An ‘Add’ loan increases your existing loan amount. Though your payment amount will increase and you will pay more interest over the term of the loan, the loan term and loan type remains the same. You could potentially consider using an ‘Add Loan’ if the funds will be used for larger renovations and you would prefer to repay the money over the remaining term of your existing home loan. Say you have a $300,000 home loan with 20 years remaining. You decide to apply for a $15,000 loan to renovate your bathroom. If you’re successful in your application, your home loan would increase to $315,000 and still have the 20 years remaining.
An ‘Equity’ loan is an entirely new loan. It’s still secured against your home, however you will have a separate additional repayment each month. You can choose to select a different loan type and/or loan term to your current home loan. You could consider taking out an ‘Equity’ loan if you would like to repay the new loan amount on different terms to your current home loan (e.g. by repaying the loan faster). The term of the loan will need to be at least 8 years and no longer than 30 years.
Consider cashback on your home loan
If you have made additional repayments on your loan, you may be able to apply to access these funds through cashback to pay for your renovations. Once approved and established, our Home Loan Cashback feature could allow you to redraw money you’ve paid in addition to your normal scheduled home loan repayments. Customers with Standard Variable and Back to Basics Variable Home Loans are able to apply to access this feature. Visit the Home Loan Cashback page for more details.1
Other financing options
Use your credit card
For a smaller DIY renovation, opting to use a low interest rate credit card is another way you could potentially fund a home renovation project.
Aside from the convenience, credit cards can make it easy for you to purchase materials you need, especially if you can’t pay the full amount straight away, such as if you had to pay an unexpected bill for a hospital visit or car repair. You will, however, be charged interest on any amount outstanding once the interest-free period ends (if any).2 Plus, there may be reward options if you want more from your card.3
Dip into your savings
If you’ve got extra money set aside for a home renovation, then you could save money in the long run by avoiding the interest you’d have to pay with a loan or credit card. However, you may want to consider a few things.
- If you have your savings in an offset account, deciding to use these funds for your renovation will increase the amount of interest you pay on your home loan. Keeping your savings in an offset account won’t reduce your monthly repayment, but it will reduce the amount of interest you pay each month, which means more of what you pay can go towards reducing the principal balance. Let’s say your loan is for $400,000 and you have $10,000 into your offset account. Each month you will only be charged interest on $390,000. Should you choose to use the $10,000 to fund your renovation, you will then be charged interest on the full $400,000 balance on your loan.4
- Do you have extra cash saved? It can be handy to have an emergency fund for unexpected events, like if your car breaks down or you need to cover additional renovation costs. It’s good to have cash set aside just in case.
Talk to the home loan specialists
Getting the right finance for a renovation project could help it succeed, and help ensure you’re not paying more than you need to. If you’d like more information about the kinds of loans available for home renovations, Suncorp Bank’s Home Loan experts can answer any questions you might have. Get in touch today for an obligation-free consultation to help you decide whether this is the right option for you.
- How to renovate your home on a budget
- 5 costly mistakes that home buyers make
- How much does it cost to refinance a home loan?
1You need to apply for Cashback, which may be available subject to conditions specified in the contract. Please read these conditions carefully. Available Cashback may exclude any recent cheque, direct debit or pay at post payments and external transfers cannot be performed using online Cashback. Fixed Rate home loans are excluded from Cashback.
2The interest free period applies from when you pay your full closing balance from your last statement of account by the payment due date (excluding any fixed payment option balance which isn’t due for payment by that payment due date). No interest free period is available on cash advances or balance transfers. While you have a balance transfer, you will be charged interest on your daily unpaid balance.
3All rewards are subject to the Terms and Conditions of Suncorp Credit Card Rewards and Suncorp Credit Card Qantas Frequent Flyer Rewards for Suncorp Clear Options.
4A Mortgage Offset Fee may apply to link the 100% Home Loan Offset facility to your home loan, which is waived under the Home Package Plus. The Mortgage Offset fee is charged to your linked loan account.
Personal Loans, Home Loans and other banking products are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Eligibility criteria, fees, charges, terms and conditions apply and are available on request. Please read the relevant Product information Document before making any decision about a product. Contact us for a copy. Any advice does not take into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it.
Citigroup Pty Limited ABN 88 004 325 080 AFSL No. 238098 (“Citigroup”) is the credit provider and issuer of Suncorp Clear Options Credit Cards. Suncorp Bank promotes and distributes Suncorp Clear Options Credit Cards on Citigroup’s behalf under an agreement with Citigroup. Suncorp Bank will not guarantee or otherwise support Citigroup’s obligations under the contracts or agreements connected with the Credit Cards (other than those relating to Suncorp Bank internet banking and telephone banking). Suncorp Bank does not assist you to make the application and does not suggest you apply for any particular Suncorp Clear Options Credit Card type. Citigroup, not Suncorp Bank, will be assessing your application.
The information is intended to be of general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.
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