Your Rowville home has served you well, but maybe it's time for that kitchen upgrade you've been dreaming about, or perhaps you need an extra bedroom for your growing family. Whatever your renovation plans, understanding your home loan options can make all the difference between a project that drains your savings and one that adds value while protecting your financial stability.
Why renovating can be smarter than moving
Many Rowville residents face this question: should we renovate or relocate? With property prices across Melbourne's eastern suburbs remaining strong, the costs of selling, buying, and moving can quickly add up. When you factor in stamp duty, agent fees, and the emotional toll of leaving your established neighbourhood, renovation often makes more financial sense.
Renovating your current property allows you to:
- Build equity in your existing home
- Avoid the transaction costs of buying and selling
- Stay in a location you love, close to schools and community
- Create a home tailored to your exact needs
- Potentially improve your borrowing capacity for future investments
Understanding your home loan products for renovations
When it comes to funding your renovation, several home loan products and home loan packages can support your project. The key is finding the right match for your circumstances.
Refinancing your owner occupied home loan
If you've built up equity in your Rowville property, refinancing could unlock funds for your renovation while also giving you the opportunity to secure better current home loan rates. This involves replacing your existing loan with a new one that includes additional borrowing for your renovation costs.
Construction loans for major renovations
For substantial projects that require staged payments to builders, a construction loan might suit your needs. These loans release funds progressively as work is completed, so you only pay interest on what you've drawn down.
Using your offset account or redraw facility
If you've been diligently saving in a linked offset or mortgage offset account, you might already have funds available without needing to apply for additional lending. This approach can save you interest while giving you immediate access to renovation funds.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Craft Financial today.
Choosing between variable rate, fixed rate, and split rate options
When you apply for a home loan or refinance for renovation purposes, you'll need to decide on your interest rate structure. Each option offers different home loan benefits depending on your situation.
Variable interest rate loans move with market conditions, which means you could benefit from rate decreases. Most variable home loan rates also offer home loan features like offset accounts and the flexibility to make extra repayments without penalty.
Fixed interest rate home loan packages lock in your interest rate for a set period (typically one to five years), providing certainty for your budgeting. This can be particularly valuable when you're managing renovation costs alongside regular living expenses.
Split loan arrangements give you the advantages of both structures. You might fix a portion of your loan amount for stability while keeping the rest variable for flexibility and access to a linked offset account.
Principal and interest versus interest only repayments
During renovation, some homeowners opt for interest only repayments to keep their cash flow manageable while they're paying for materials and labour. Once the project is complete, they switch back to principal and interest repayments to build equity more rapidly.
This strategy can provide breathing room during the construction phase, but it's important to understand that interest only periods don't reduce your loan amount. Your mortgage broker can help you calculate how this might affect your long-term financial position.
Understanding loan to value ratio (LVR) and Lenders Mortgage Insurance (LMI)
Your loan to value ratio plays a crucial role in determining what you can borrow for renovations. If your planned borrowing pushes your LVR above 80%, you may need to pay Lenders Mortgage Insurance (LMI), which protects the lender if you default on your loan.
However, if your renovations significantly increase your property's value, you could find yourself in a stronger position with improved equity. This is where professional advice becomes invaluable – understanding the numbers before you commit can save you thousands.
Home loan features that support renovation projects
When comparing rates and home loan packages, look beyond the interest rate. These home loan features can make your renovation journey smoother:
- Portable loan options – If you decide to sell and move during your renovation, a portable loan lets you transfer your existing loan to a new property
- Redraw facilities – Access extra repayments you've made when renovation costs arise
- Offset account benefits – Park your savings to reduce interest while keeping funds accessible
- Interest rate discounts – Many lenders offer rate discount incentives for refinancing or larger loan amounts
Getting Home Loan pre-approval for renovation finance
Before you commit to contractors or make deposits on materials, securing Home Loan pre-approval gives you confidence in your budget. This process involves assessing your income, expenses, and equity to determine how much you can borrow.
With pre-approval in hand, you can:
- Negotiate with confidence when getting quotes
- Lock in contractors knowing you have finance arranged
- Avoid the disappointment of scaled-back plans due to funding shortfalls
- Move quickly when you find the right builder
Calculating home loan repayments for your renovation
Understanding how much your renovation will add to your repayments is crucial for maintaining financial stability. When calculating home loan repayments, consider:
- The additional amount you need to borrow
- Current interest rates (both variable and fixed options)
- Your preferred loan term
- Whether you'll make principal and interest or interest only repayments initially
Your mortgage broker can run different scenarios to show you exactly how each option affects your regular repayments and total interest paid over the life of your loan.
Access Home Loan options from banks and lenders across Australia
One significant advantage of working with Craft Financial is our ability to access Home Loan options from banks and lenders across Australia. Rather than being limited to one institution's products, we can compare rates and features across multiple lenders to find the home loan application that matches your renovation goals.
Different lenders have different policies around renovation lending. Some are more comfortable with owner-occupiers, others specialise in investment properties. Some offer better rates for larger borrowings, while others provide superior home loan features for smaller amounts. We understand these nuances and can guide you to the right lender for your circumstances.
Making your Rowville renovation dreams a reality
Your home is more than just bricks and mortar – it's where your family creates memories and builds their future. Whether you're adding a second storey, updating your kitchen, or creating an outdoor entertaining area, the right finance structure can help you achieve home ownership goals while maintaining your lifestyle.
Renovating with a well-structured home loan allows you to invest in property you already own, potentially improving both its value and your quality of life. The key is understanding all your options and making informed decisions based on your unique circumstances.
As your local mortgage broker in Rowville, we're here to help you understand the full range of home loan products available and find the solution that supports your renovation vision while protecting your secure future.
Call one of our team or book an appointment at a time that works for you. Let's discuss how we can help turn your renovation plans into reality with the right home loan structure for your needs.
