Should you consider refinancing to fund a renovation?
Refinancing your home loan could not only help you access the extra funds you need for home renos, but it also provides you with a great opportunity to find a more competitive rate.
Here’s some ways refinancing could potentially help you free up some funds.
Refinancing for a lower interest rate
With interest rates at an all-time low, plenty of homeowners are using these low rates as a chance to review their existing home loan. Picking a new provider that offers a lower interest rate could potentially reduce your home loan repayments, equalling more money in your pocket to put towards renovations.
There’s no doubt even a small reduction to your interest rate could save you thousands!
Let’s say you owe $300,000 on your mortgage with an average standard variable rate of 4.51% pa, your monthly repayments would be $1,670. If you change your home loan to a rate of 2.70% pa your monthly repayments would drop down to $1,377. That’s a saving of $293 per month and $87,881 over 25 years.
To work out what your monthly repayments might be and how much you could save through refinancing, you can use our Loan Comparison calculator.
Refinancing to unlock equity
When starting the process of refinancing your loan to another lender, you might find that your property has increased in value. The difference between the value of your home and how much is still owed on any loan is known as equity, and you may be able to unlock these funds to help pay for a renovation project. Many homeowners are surprised at the equity that has accumulated over time as a result of rising property values and paying down their loan balance. It can be an easy way to fund that open-plan extension or new bathroom you’ve always wanted.
Refinancing for a cashback incentive
While thinking about refinancing, you might also want to consider a new home loan that offers a cashback incentive. Due to a highly competitive market, some lenders may actually give you money to refinance your home loan with them. And while cashbacks used to be quite low, some lenders are now offering truckloads. It could be a nice little bonus to put towards your renovations.
It’s important to note that if you choose to refinance to fund your renovations, it may come with costs – mainly discharge fees on the old loan and application fees on the new loan. These costs vary between lenders, so you need to do your research and make sure refinancing is the right move for you and your circumstances.
However, don't let a small upfront cost stop you from making a big saving in the long-term, which could help fund your dream project.
Get in touch for an obligation free chat
If you think it’s the right time to refinance your home loan, we’re more than happy to walk you through the process and find the right option for you. So why not make an appointment with one of our friendly Mobile Lending Managers by phone, email, video call or home visit. Or call us on (08) 8202 7777, 8am – 8pm weekdays or 8am – 2pm Saturdays.