Home Remodeling Through Refinancing
There are a few options open when you plan to renovate - you can get a separate loan entirely, or you can refinance.
16/09/2021
A report conducted by Westpac shows that 76% of Australian homeowners are either in the process of remodeling, or they are planning to. There are a few options when you plan to renovate. You can get a separate loan entirely, or you can refinance. If you have been in your home for a few years and have paid the loan down refinancing would probably be the best option for you.
Refinancing a home does a couple of things for you. First, it will reduce the cost of interest, due to the lower rates that you get with your new loan, which frees up some money for the remodel. The money that you would have to include in your monthly payments can now be used to fund projects around the house. Just be sure that when you get the new loan that it does have better rates, otherwise it may be better to find a new lending agency. If you cannot find one you will need to factor in the other benefits before moving forward with refinancing.
When refinancing your home loan, you may want to investigate a cash-out refinance option. This type of loan is based on the equity of your home. To fully grasp the benefits of this type of refinancing, you must know what equity is. The equity of your house is the current value of your home minus the amount of the home loan that you have left. For example, if your home is currently appraised at $750,00 and you have $600,000 left on the loan, you have an equity amount of $150,000.
This is important to know because when getting a refinance home loan that is a cash-out type the $150,000 inequity can be taken out. Once the loan is approved you will get this amount in cash. Of course, your loan payments may increase, and your balance will go back up. Since you found a loan with better rates you will still be ahead of the game because you can pay the loan off faster, and still at a better price than the original loan.
Refinancing your home loan to remodel is, for the most part, a good move to make. You not only get to pay off your original loan, but you get the chance to get better rates while getting some cash in your pocket. Whether you get paid through a cash-out policy, or you use the money that you save monthly, you are better off.
Remodeling can be a costly undertaking and
before you know it you could be out of money
with no way to continue. It would not be a good
idea to leave your bathroom without a toilet and
sink because you didn't have the funds to pay
for the new plumbing. Plan before you start the
project. Refinancing can get you the money
needed to start, and finish your upgrade. A side
benefit of remodeling is that it will increase
the equity of your house even more because the
value will go up.