The average cost of home renovations in Australia could be anywhere between $45000 and $300000. Not all homeowners have access to immediate funds to go through with massive renovations without a loan. A renovation loan can give you access to the funds you need to fix up your property.
As is common with all loans, the bank considers your credit score and repayment capacity before allotting the loan. Make a detailed assessment of your renovation fund requirements before you apply for your loan.
The best way to do this is to use a renovation loan calculator online. Also, check the interest rates and other associated charges before applying for the renovation loan.
Understand Your Renovation Costs
Contents
Discuss with your architect, interior designer, engineer, or other professional managing your home renovations to know your renovation costs.
In some cases, home renovation costs are even higher than actual property construction costs. To remodel your home or business property entirely, you may have to pay for demolishment, tile removal, and other significant expenses.
Minor renovations may not cost as much. You may use a renovation loan calculator to estimate your loan requirements, and you can calculate your interest rates and other repayment costs with this calculator.
Choose a Bank
Renovation loans usually fall under the category of personal loans. You may try comparing personal loan interest rates offered by different banks in your location and then choosing the most cost-effective one.
Discuss your loan requirements and the loan terms and conditions with the bank’s authorised representatives. If possible, get written brochures and clarifications on loan terms to avoid any surprises in the future. These experts can help you streamline your expenses and figure out ways to minimise your interest costs.
Understand Your Loan Costs
While a loan repayment calculator can give you a basic idea of your repayment costs, it is essential to learn and understand the detailed breakdown of the costs before applying for the loan. Ensure that there are no additional hidden costs or conditional costs associated with the loan.
Consider asking the bank representatives for a detailed breakup of your loan costs. Loan processing fees and other service charges are common cost elements that most banks charge.
Also, get information on the paperwork you will have to submit to get the loan. Besides income statements and identity proof documents, you will also need to submit documents that justify your credit score and financial standing.
The bank may also ask for documents related to the property you plan to renovate, including previous mortgage agreements, title deeds, and documents that show property value. If your renovation needs are urgent, go with a banking company requiring minimal paperwork and a quick loan processing period.
The loan term is another vital point that deserves attention. It’s best to go for a loan with adequate tenure if your home renovation needs are extensive. The average loan tenure could be anywhere between three months and five years.
Choose Your Bank
Assess the reputation and customer service quality of the bank you choose. Also, check how much time the bank is likely to take to process your loan. Some innovative banks allow customers to customise their loan repayment frequencies and other similar aspects.
These additional services can become highly convenient for you while you go through the hassle of renovating your property. Reviews and ratings posted by former customers will give a better understanding of the bank’s service quality.
Some banks may also charge an additional establishment fee. It is recommended you go with a bank that doesn’t.
The Interest Rate
The interest rate is the most vital aspect to consider regarding any loan. Rates may vary based on loan amount and loan tenure. The average interest rates for renovation loans are around 5% in Australia. You will most likely be subject to a penalty if you default interest payments.
Check if the home renovation loan suits your needs. A flexible loan option with flexible repayment terms is ideal for renovation scenarios. Whether it’s a small extension project or a complete knockdown project, you may face hitches along the way.
You may even need additional financing in some cases. Also, check if the bank charges additional fees for early repayment. Explore the market interest rates and interest rates of other similar options before you finalise a bank.
Apply for the Loan
The next step is to actually submit the loan application. You will also have to submit documents to prove that you have citizenship or a permanent residency in the country. Innovative banks have now digitised the entire loan application process.
Instead of going to a bank, you can visit the bank’s website and upload the application and required documents. All processes, including the ID verification process, are online. The bank will then review all the documents you’ve submitted and get back to you in one or two business days.
The application will ask for your details, your required loan amount, and other related points. If the bank approves your application, they may send you an email which you can then sign. Through the verification process, the bank will also assess your credit history.
If you are a minor or have pending liabilities, the bank may reject your application. Similarly, if you have been bankrupt or don’t have sufficient income, your loan application may be rejected. All loan applications are typically subject to credit approval and other proceedings. However, You can also opt for the approval loans where you will be awarded the loan despite having a low or bad credit score.
How Long Will the Loan Take?
The time taken by the bank to release funds is another vital point to consider. If you are carrying out a home renovation, you may need access to immediate funds.
Choose a bank that will release your loan in two or three business days. Some advanced banks even allot loans in a few hours. You won’t have to worry about your glitches in your renovation project due to fund shortage when working with these efficient banks.
The size and cost of your renovation project will vary based on your tastes and your requirements. Financial support from trusted digital banks can make the process smoother. If you plan to take a personal loan for renovation, it’s recommended you start assessing and comparing banks early on and apply for the loan at the earliest.
