Home Renovation Loans are becoming much more common in recent years. There are a number of different ways to obtain a loan for renovating your home, and we at All About Financial Services can assist you with selecting the best lender to provide you with a Renovation Loan.
“As-Is” Renovation Loan
What this means is the Bank will lend you the money to do your renovations (as long as the work is not structual) on the current valuation of your property. This is done when you have a good amount of equity in your property.
For example, you owe $400,000 and your home is currently worth $650,000. You want to do $100,000 of renovations. You will of course first need a couple of quotes showing the cost of the renovations. With an approved “As-Is” Renovation Loan the bank will lend you the money and pay this straight to you. This means that you have control of who and how much you pay the builder or sub contractor.
“On-Completion” Renovation Loan
These loans are similar to a Construction Loan and are generally used when there is a structual change being done to the property. The Bank or other lender will value the property as it is today and then look at the plans and quotes to to the work. The Bank/lender’s valuers will do a valuation, looking at what the property will be worth after the work is completed.
The Lender of your choice will then pay out your existing mortgage, and hold the additional approved money that is needed to do your renovations. As the builder does the work, the builder will ask for payments at different stages. If you are happy with the work to that stage, then you will request that the Lender makes a progress payment to the builder directly from the lender to the builder. There may be a number of stages during the construction or renovation process.
The new money is generally interest only until the renovations are completed. We at All About Financial Services have been assisting our clients to obtain construction loans for the past 15 years, and we have a full understanding of the process, as well as the progress payments arrangement.