- What Is A Home Improvement Loan?
- What Is A Home Loan Top-Up?
- Personal Loan vs Mortgage Top-Up: Side-by-Side
- Eligibility and Application Basics
- Paying Student Services and Amenities Fees
Home renovations can be an exciting and rewarding process for many Aussie property owners, whether it’s a bathroom update, a kitchen refresh or an extension to the house. But renovating can be costly, and those expenses often eat into your savings sooner than you might realise.
To supplement the funds in your savings account for renovations, some people choose a straightforward cash loan, while others choose a home loan top-up, tapping into the equity in their home to access the funds they need. Either option can help get your renovation underway, but each works differently and can suit different budgets.
So which option best suits your project? Ultimately, that will be up to you and your financial situation. But here is the information you need to know to make an informed decision.
What Is A Home Improvement Loan?
A home improvement loan is simply a personal loan that you can use to pay for renovations to your house. You receive a lump sum payment of up to $5,000, which you agree to repay over a fixed term outlined in your loan contract. You make regular repayments – weekly, fortnightly, or monthly – until the loan and interest are fully paid off.
What You Need To Apply For A Loan
To apply for an online loan for home renovations, you need to meet specific eligibility requirements. You will need to be:
- At least 18 years old.
- An Australian citizen, permanent resident or a valid Visa holder.
- A registered owner of a vehicle that you can put up as security.
- Employed for at least the last three months and able to show evidence of consistent income.
Home improvement loans are generally smaller than home loan top-ups, and the application process is often quicker overall.
What Is A Home Loan Top-Up?
Topping up your home loan means increasing your current mortgage by using the equity you’ve built in your property, giving you extra funds to put towards renovations.
Before you apply for a mortgage increase, your provider verifies your equity and income and assesses whether your new repayments are affordable for your current financial situation. If they approve your application, your lender will either roll the added funds into your mortgage or create a separate account for the funds, distinct from your home loan.
How The Home Loan Top-Up Works
When you apply to increase your mortgage with a home loan top-up, you can decide whether to lock in the interest rate for maximum certainty or opt for a variable rate that gives some flexibility. As home loan terms typically run longer than smaller personal loans, your repayments may feel less of a burden, but you will likely pay more interest over that time. Like home improvement loans, top-ups to your mortgage can come with added fees and charges, so it pays to take note of the full comparison rate.
Personal Loan vs Mortgage Top-Up: Side-by-Side
Here is a quick comparison of the important points to consider when deciding between a loan for home improvements and a top-up of your mortgage.
- Interest rates: instant loans for home renovations typically have higher interest rates than home loan top-ups. However, comparison rates generally show a more accurate picture.
- Fees and charges: a personal loan can involve an establishment fee and smaller ongoing monthly fees, while home loan top-ups often come with valuation fees, lender charges, and package fees.
- Loan terms: terms for personal loans are shorter than mortgage top-ups, which can last many years.
- Loan amounts: Red Tree Finance offers loans ranging from $2250 up to $5000, while mortgage top-ups can exceed that maximum amount. Determining the scope of your renovation project will likely help you decide which funding option best fits your requirements.
- Flexibility: mortgages may allow extra repayment or a redraw facility, while some personal loans are straightforward but less flexible. At Red Tree Finance, there is no penalty for repaying your personal loan early.
- Speed: applying for a personal loan is often faster than home loan top-up reviews.
Understanding these key differences can help you determine the more suitable option for your home renovation needs.
Eligibility and Application Basics
Whether you decide upon a fast loan for quick renovation cash or you opt to increase your mortgage, you will need to meet eligibility requirements before you apply. The criteria for each will differ, but neither needs to cause unnecessary confusion.
Personal Loan Suitability
When you apply for a personal loan with Red Tree Finance, we will assess your application by looking at your income, any existing loans, and your credit score, among other eligibility criteria.
Home Loan Top-Up Eligibility
To top up your home loan, your bank or lender will reassess any existing home loan accounts, your equity, and your loan serviceability. This can result in more paperwork and a longer waiting time.
Remember that, if you’re comparing lenders or loan types, submitting multiple applications at once can impact your credit score. This, in turn, can harm your loan application.
Alternatives To Both Options
If neither a personal loan nor a home loan top-up feels like the right option for you, you do still have other choices.
Some homeowners choose to:
- Dip into their savings accounts
- Use a redraw facility
- Stagger the renovation to better manage costs
Others might turn to their credit card to fund the project, but that can attract high interest charges.
Whichever option you choose, it’s important to be mindful of the additional fees and interest rate charges that can increase the overall costs. Ultimately, the end goal is a better and more valuable home, not a financial headache.
Your Renovation Deserves A Smart Plan – And The Right Funding
At the end of the day, there is no one-size-fits-all answer to whether a home improvement loan or a home loan top-up is the better choice for your house renovations. That is something only you can decide based on the information you have.
A same-day cash loan can work well for smaller upgrades to your house. They typically have quicker approvals and a shorter repayment commitment, but often come with higher interest rates and comparison rates.
For larger, more extensive renovation projects, a mortgage top-up can provide larger loan amounts at lower interest rates. However, the application process can take longer and can extend the length of your home loan term.
If you’re interested in a personal loan to fund your smaller house renovation projects, Red Tree Finance can provide you with a lump sum of up to $5000. You can get a decision on your application within two hours and, if approved, receive your funds soon after. It’s an easy way to get your home renovations up and running without financial stress. If you have any questions, get in touch.
FAQ
What is the best way to fund a house renovation?
The best way to fund your house renovations depends on your unique financial situation. You’ll need to consider your budget for the project, the scope of your renovations, your income and your ability to make your repayments. Some homeowners may choose a personal loan, while others may decide to increase their mortgage and use the added funds to pay for their renovations.
How do most people fund renovations?
People can fund renovations through personal loans and mortgage top-ups. They can also fund their house renovations with their credit card, their savings account or a redraw facility on their home loan.
Which renovation adds the most value to a home?
Among the projects that can boost the value of your home the most are:
- Energy efficiency improvements
- Kitchen upgrades
- Bathroom remodels
- Home automations
People also read:
The information provided in this blog is of a general nature and is provided without considering your specific objectives, financial situation, or needs. It is intended for informational purposes only and should not be relied upon as financial, investment, or other professional advice.Before making any financial decisions or taking action based on the information presented, you are strongly encouraged to assess its appropriateness in light of your individual circumstances. Red Tree Finance does not intend to provide personalised financial advice, and you should seek independent financial, legal, tax, and other relevant advice tailored to your unique situation.