How to finance home renovations
Options include private loans or borrowing on your home loan
Most people at some point in their lives arrive at a point where they feel they have outgrown their houses and feel the urge to renovate their homes, which comes at a significant cost.
The question then becomes how to finance your home renovation with numerous options on the table to choose from. Some people opt for a personal loan to finance upgrades to their homes but this is regarded as the most expensive option as such loans are unsecured and come with high interest rates.
However, if planning on small upgrades, a personal loan might be a good option. Refinancing your home loan is largely considered to be a cost-effective way to finance a home renovation and increase the market value of your home.
Banks nowadays allow you to extend your existing home loan and apply for further lending, giving you access to the available equity on your existing bond to pay for other expenses, like your home renovations.
Standard Bank provides different ways to finance a home renovation, even if you don’t have the available cash. Here are two options to consider:
• Option 1: A re-advance on your existing home loan
Look at applying for a re-advance on your home loan if you’ve already paid a portion of your home loan’s total amount. In doing so, you’ll be able to borrow all or part of your total home loan amount again. Once your home loan balance reduces, you can apply for another re-advance.
• Option 2: Apply for further lending Another option is to take out a second loan, or further loan, on your property over and above your existing bond.
Further lending is one of the most cost-effective ways to finance your home alterations. This can only be done if the additional amount you require exceeds your existing registered loan amount and the value of your existing property has increased since you bought it. Your bank will need to complete a new home valuation to establish the present value.
When the budget is tight, you will need to prioritise which sections of your house to renovate. Depending on your personal circumstances and the state of your home, here are the three areas you can focus on that will add value to your home:
1. Kitchen and bathroom
Many real estate professionals agree that homeowners who renovate for the purpose of selling their home should focus on these two rooms.
2. Interior and exterior paint
Painting is an inexpensive and very profitable renovation project. If you’re planning on selling your house, choose neutral shades over trendy colours that may not appeal to all buyers.
3. Roof
Investing in a roof upgrade increases the value of your home and, most importantly, protects you against various problems such as water infiltration.