Renovating is very similar to building and most of the same principles apply. A common pitfall of renovating is that it is easy to underestimate the cost and/or the duration of the renovation job, i.e. how long it will take and how much it will cost.
Never under-estimate the time factor for renovations and remember, you have to live through all the disruption of the renovation. Although, for a major renovation, you may have to move out for a few months.
As with building a house, you will need to have an architect or draughtsperson draw up the plans for your renovation, then apply for the relevant consents from your local council. For a substantial renovation, a registered valuation showing the projected end value of your home will be required by the bank.
The bank will generally lend up to 80% of the present value of your home (before renovations), or 80% of the projected end value, as confirmed by a registered valuation. Loan funds will be released in progress payments during milestones achieved during renovation. Your build contract will contain a payment schedule, which sets out when progress payments will be made under the terms of the contract.
A revolving credit home loan can be a good option for a renovation. Also known as a “flexi” loan, it is much like an overdraft, which allows you to draw down funds as and when you need them. You only pay interest on what you have drawn down at any time, which provides ideal flexibility in this situation. Once you have drawn down all funds and completed your renovation, I can help you decide on your final loan structure.