Top 3 Ways to Finance Your Renovations

Are you considering renovating? If so, you’re not the only one, because renovations are incredibly popular, with homeowners investing $2.84 billion on alterations and additions in the June 2024 quarter, according to the Australian Bureau of Statistics. Typical costs range from about $2,000 to $5,000 for bedrooms, $15,000 to $30,000 for bathrooms and $25,000 to $50,000 for kitchens, according to JDL Constructions.

Here are three ways to finance your renovations:

Take out a construction loan. With a construction loan, the funds will be distributed in stages throughout the project, rather than in an upfront lump sum, and you’ll be charged interest only on the funds you’ve already received. Your construction loan will be interest-only during the building phase and will then revert to a standard principal-and-interest home loan once the building has been completed.
Take out a personal loan. Compared to a construction loan, the application process is likely to be faster and your chance of approval is likely to be greater, but your interest rate is likely to be higher as well.
Pay cash. This is the simplest option.

If you’re thinking about paying for the renovations with a credit card, please be careful, because while you will not have to go through an application process, the interest rate will be extremely high and could leave you susceptible to falling into a debt trap.

More and more Australians are turning to property investment, new analysis has revealed.

CoreLogic’s head of research, Eliza Owen, found that the number of investors entering the market was exceeding the number exiting, by comparing home loans data with listings data.

“Investor inferred listings have been trending higher since March this year, to 13,000, but remain well below the peak of investor listings activity in November 2021,” Ms Owen said.

“As investment listings remain below these highs, the number of new loan commitments remains high at 18,400. The previous five-year average for the month was 14,516.”

Why is property investing so popular? Probably because it offers three big potential benefits:

Capital growth – if your property rises in value
Ongoing rental income – which can be used to pay down your mortgage
Tax benefits – you can reduce your taxable income if your property is negatively geared

Reach out if you’re thinking about buying an investment property. I’ll model different repayment scenarios for you, so you can make an informed decision about whether investing is right for you.

There’s a lot more to a home loan than just the interest rate. The features of the loan can also have a big impact on your total mortgage costs and repayment flexibility, which is why it’s important to understand the potential benefits of a redraw facility and an offset account.

Redraw and offset have one thing in common – they reduce the amount of interest you get charged. If, for example, you have $500,000 outstanding on your loan and $40,000 in either redraw or offset, you’ll be charged interest on only $460,000 (i.e. $500k minus $40k).

But there are subtle differences between the two features.

Redraw is a facility that sits within your loan. The way you accumulate money in redraw is by making extra home loan repayments. The lender will allow you to borrow back (or redraw) these extra repayments, subject to certain conditions. But because this money belongs to the lender, it’s technically possible the lender might decide one day not to allow you to reclaim the money, or change the conditions of redraw.

Offset is a separate transaction account that’s linked to (but separate from) your home loan account. The way you accumulate money in offset is through deposits – for example, salary payments. The money in your offset belongs to you, so the lender can’t prevent you accessing it.

Pros: you can use redraw and offset to reduce your interest bill and pay off your home loan sooner.
Cons: your lender may charge you a higher ongoing fee or higher interest rate to access these loan features. Also, you may be charged a fee for each redraw transaction.

The federal government is aiming to improve housing affordability by increasing the supply of housing, which would be expected to reduce demand and put downward pressure on prices. As a result, the government is attempting to facilitate the building of 1.2 million homes in the five years from July 2024. So what does the latest homebuilding approvals data show?

Unfortunately, it suggests the government will struggle to achieve its target.

In the five years to September 2024, only 937,950 approvals were issued. This is a drop-off from the five years to September 2023, when 949,469 approvals were issued, according to the Australian Bureau of Statistics.

It’s also worth noting that because some projects never proceed after receiving the green light, the building of 1.2 million homes will require an even greater number of approvals.

But there is some good news: Housing Industry Association economist Maurice Tapang said “the market is past its trough” and more buyers are now choosing to build new homes.

“The cost of homebuilding materials are growing at a more normal pace, while build times for houses are back to pre-pandemic levels,” he added. If that trend continues, it would represent good news in terms of affordability.

Using Your Home’s Equity to Build Wealth: The Benefits of Renovating Your Property

Owning your own home comes with the exciting opportunity to increase its value, ultimately building wealth for your future. Recent spikes in house prices, with an average increase of around 21% nationally last year, have led to a surge in property values. By leveraging the equity in your mortgage, you can invest in enhancing your home and lifestyle.

 

Many homeowners are choosing to use their growing equity to upgrade their current homes, avoiding the hassle of house-hunting, auctions and additional expenses associated with buying new property. Renovations have become a popular choice with owners utilising their loan equity to create new spaces like building extensions, home offices and upgrading kitchens and bathrooms. Not only do these projects enhance your living experience, but they can also significantly increase the value of your property.

 

Before diving into a renovation project, it is important to ensure you have the right lending arrangement in place. You may need to apply for finance, and your lender will conduct a home revaluation as part of the approval process. Working closely with your broker, we can streamline this process and help you avoid the complexities of applying for a new loan.

 

Here are a few tips to consider below starting your renovation journey:

  • Obtain quotes from at least three reputable builders or suppliers to understand the project costs.
  • Add a buffer of 10-20% to cover any unexpected expenses during construction.
  • Discuss your renovation plan with your mortgage broker or financial adviser to align it with your wealth creation goals.
  • Consult a real estate agent to assess the local market and weigh the value of renovating versus moving.
  • Check with your mortgage broker about whether you might be required to pay Lenders Mortgage Insurance if you go beyond the 80% loan-to-value ratio (LVR). What is LVR? It’s insurance that protects the lender in the event you default. As a rule, lenders insist on this policy if you go over the 80% threshold.

By strategically using your home equity for renovations, you can enhance your living space, increase your property value, and secure your brighter financial future.

 

 

Your Fixed Mortgage Is Expiring: What to Do!

Your Fixed Mortgage Is Expiring: What to Do!

Many homeowners are facing a significant financial challenge: their fixed mortgages are expiring. This means that their interest rates could potentially double or triple, putting a strain on their finances.

If you’re one of these homeowners, it’s important to understand your options and take proactive steps to manage these potential interest rate increases.

Here are a few things you can do:

Negotiate with your current lender for a better variable interest rate.

Lenders may be willing to offer you a discounted rate to retain your business, especially if you have a good repayment history and strong credit.

Compare and refinance to a new lender. 

Shopping around and comparing offers from different lenders could lead to a better interest rate and save you money over the long term. However, it’s important to factor in the costs of refinancing, such as application fees and legal costs. A mortgage broker can assist you with this.

Consider refixing with your existing lender for another fixed term. 

This can offer you continued stability in your monthly payments, provided the terms are favourable.

Take advantage of easier refinancing options. 

Some banks are now offering refinancing with a 1% serviceability buffer instead of the standard 3%. This could be a lifeline for those who feel trapped in their current arrangements.

Consider a split loan. 

This is a type of loan where you have both a fixed-rate and a variable-rate component. This can be a good option if you want to lock in a low fixed rate for some of your loan, but also want to take advantage of the lower interest rates that may be available on a variable rate in the future.

Get a financial assessment. 

Before you make any decisions about your mortgage, it’s a good idea to get a financial assessment from a qualified financial advisor. This will help you to understand your financial situation and make sure that you are choosing the right option for you.

No matter what option you choose, it’s important to act early. The sooner you start the process, the more time you’ll have to compare rates and find the best deal for you.

Exploring Mortgage Solutions with Bayland Finance

Bayland Finance is a mortgage brokerage that understands the unique needs of each homeowner. We offer expert guidance and explore alternative avenues to find the best mortgage solution for you. We are committed to delivering exceptional service and uncovering the best solutions, and we have a reputation for caring about our clients. Get in touch with us today to learn more about how we can help you shape your mortgage’s future.

Empowering you to shape your mortgage’s future is our ultimate goal.

7 Reasons to use a Mortgage Broker

Your Financial Compass, Without the Price Tag: We’re a Free Service

Are you considering taking the big step towards homeownership? Or perhaps you’re contemplating a strategic investment in the property market?

Either way, navigating the labyrinth of home loans, interest rates, and financial jargon can be a daunting task. This is where mortgage brokers come in – your trusted allies in the world of property finance. With over 70% of loans now being submitted through mortgage brokers, it’s clear that they’re not just a trend, but a strategic advantage. Let’s delve into why using a mortgage broker can be your key to unlocking a seamless and customised home financing journey.

At Bayland Finance, we believe that everyone deserves a secure financial future.
Our team of lending specialists are dedicated to helping you every step of the way – from first home buyers to those looking to buy their dream home, or build their investment property portfolio.

With our personalised approach and commitment to customer service, we can help you navigate the complex world of lending and find the best solutions to achieve your future goals.

1. We Educate and Advise

Imagine having a personal guide through the intricate maze of home loan options, policies, and lenders. Mortgage brokers are exactly that – experts in the field who specialise in connecting you with the most suitable loan options. They have an in-depth understanding of the lending landscape and stay updated on the latest market trends. This wealth of knowledge is invaluable in helping you make informed decisions that align with your financial goals.

2. Tailored Solutions, Personalised Service

No two individuals have the same financial situation or aspirations. A mortgage broker recognises this and tailors solutions to match your unique needs. They take the time to understand your financial position, future plans, and preferences, and then match you with loans that fit like a glove. This personalised service ensures that you’re not just settling for a loan, but embracing a financial solution that complements your lifestyle.

3. Unbiased Advice

Mortgage brokers are not affiliated with any specific lender, which means their advice is unbiased and driven solely by your best interests. They act as intermediaries between you and the lenders, negotiating terms and rates on your behalf. This transparency ensures that you’re presented with a range of options and can make an educated choice that aligns with your financial wellbeing.

4. Saves You Time and Effort

The search for the perfect home loan can be time-consuming and overwhelming. Mortgage brokers simplify the process by doing the legwork for you. They compare loan options, negotiate rates, and manage paperwork, saving you precious time and sparing you from the stress of dealing with banks and lenders directly.

5. Maximising Your Borrowing Capacity

One of the crucial aspects of securing a home loan is understanding your borrowing capacity. Mortgage brokers have the expertise to evaluate your financial situation and help you determine how much you can borrow. This enables you to explore homes that might have seemed out of reach, ultimately bringing you closer to the house of your dreams.

6. Access to a Wide Network

Mortgage brokers have access to a broad network of lenders, including those that may not be easily accessible to the general public. This means you can explore a diverse range of loan products, interest rates, and terms, increasing your chances of finding a loan that aligns with your financial goals.

7. Smooth and Efficient Process

From the initial consultation to the final settlement, mortgage brokers streamline the loan application process. They are well-versed in the documentation requirements and can guide you through each step, ensuring that nothing is missed. This efficient handling minimises the chances of delays and roadblocks along the way.

Why Choose Bayland Finance as your Mortgage Broker?

When it comes to selecting a mortgage broker, experience and reputation matter. Bayland Finance boasts over 16 years of expertise in the mortgage broking arena, positioning them as industry leaders.

Their commitment to exceptional customer service and tailored solutions has earned them recognition as the MFAA mortgage broker of the year winner for the regional VIC/TAS area. This accolade is a testament to their dedication to helping clients achieve their property finance goals with a personal touch.

Navigating the complex world of home financing can be made simpler, smoother, and more rewarding with the assistance of a mortgage broker. These experts offer not just financial advice, but a partnership that is committed to your financial success. With a vast network of lenders, personalised service, and an unwavering dedication to your needs, mortgage brokers like Bayland Finance are the bridge between you and your dream home. So, why not embrace their expertise and embark on your home financing journey with confidence? Your financial future deserves nothing less.