Home Improvement Loan

Home Improvement Loan

What is a Home Improvement Loan?

A Home Improvement Loan is simply an addition or increase to a current home loan for the purpose of carrying out extensions, renovations and/or improvements to an existing dwelling either Owner Occupied or Investment. The uniqueness of a home improvement loan is that you are able to borrow against the estimated on completion value of the dwelling.

How does a Home Improvement Loan work?

Let’s look at an example:-

Jock and Mary’s existing home is 40 years old and in need of some plumbing and electrical repairs. They have decided that while attending to those repairs they would also like to further improve their home with a makeover involving a complete repaint and renovation of the kitchen & bathroom. he quotation for these repairs and home improvements was $46000.

Borrowing the funds needed by increasing their existing Homeloan

Value of their home in existing condition

$ 360,000

Value of their home in existing condition

$ 360,000

Current Loan Balance

$ 294,000

Amount available for improvements & repairs

$ 30,000

Increasing their existing homeloan will leave them short $16,000 meaning they will need to either borrow the extra funds via a Personal Loan or cut back on some of the improvements?

Borrowing the funds needed by using a Home Improvement Loan

Value of their home in existing condition

$ 360,000

Value of their home on completion of improvements

$ 420,000

Borrowing Limit (90% of completed value)

$ 378,000

Amount available for improvements & repairs

$ 84,000

The Home Improvement Loan allows Jock and Mary to borrow the complete $46,000 needed for the repairs & improvements and also presents them with other lifestyle options. Provided it suited their budget, they may borrow up to an extra $38,000 for other worthwhile purposes or set up a Home Equity Credit Limit which will allow them access to funds at a later date.

The Home Improvement Loan gives them the opportunity to borrow up to $378,000 as compared to increasing their current Home Loan which restricts them to $324,000.

As you can see, a Home Improvement Loan can prove to be very beneficial when borrowing funds for repairs or improvements to your home and if structured correctly can also provide further financial benefit by allowing you access to any newly created equity.

At Community BEST our Homeloans Consultants are fully conversant with the pro’s and con’s of borrowing for home improvements and will guide you through the whole Home Improvement Loan process, from Home Improvement Loan application and set up right through to the completion of the home improvements.

To speak with a Community BEST Home Improvement Loan Consultant, phone our Finance Centre on 1300 448 91, email us or make an enquiry now by completing our 10 min Online Application.

* Loans subject to application and approval. Terms, conditions and eligibility criteria apply. Fees and charges may be payable.

Extra conditions may apply to the loan, until the repairs and/or improvements (works) have been completed satisfactorily. On satisfactory completion of the works, the extra conditions are removed as the ‘Home Improvement Loan’ converts to the home loan of your choice.