BIR Finance

BIR Finance - Finance for busy people

  • Home
  • About Us
    • Our Philosophy
    • Our Team
    • What our Clients Think
  • Services
    • Residential Property
    • Commercial Property
    • Business Lending
      • Asset Finance
      • Working Capital & Cashflow
    • Personal Loans
    • Personal & Property Services
    • Business & Property Services
  • Resources
    • Financial Calculators
    • Blogs
    • Common Terms & Abbreviations
    • Useful Links
    • Business Referral Relationships
  • Contact Us
  • Request FREE Report
1300 989 878
  • 5 ways to fund your next renovation
  • CALL NOW
  • BOOK AN APPOINTMENT
  • EMAIL US
Blogs

5 ways to fund your next renovation

Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au. And you can also book a meeting with me: https://calendly.com/michael-royal/chat-re-finance

Now, back to the Article! 😉

 

Author: Michael Royal, Finance Specialist, BIR Solutions www.bir.net.au

March 2022

 

How do you turn a large fortune into a small fortune? Get a reno! 🤣🤣🤣

So, you have run out of space or you just need to spruce things up.  You have a chat with your architect and you see the estimated cost and your heart sinks….

It seems like even the smallest renovation will cost you more these days.  Prices for building supplies have gone up and timeframes have blown out as stock sits ‘on the wharf’ – or worse, at the supplier’s wharf!

At least one thing is solved – funding your renovation.  These days, you have a LOT of options so let’s run through some of the main ones you should consider:

 

1. Use your ‘cash at the bank’ which is sitting in either your savings, term deposit or offset account.

2. Sell down your existing assets and use the cash generated.

3. Increase your home and/or investment loan with your current lender with an equity (‘cash out’) loan.

4. Refinance your home loan and increase it with an equity loan with a new lender.

5. Obtain a personal loan.

 

BONUS ways:

– Your parents 😊

– Your business (if you have one and it has spare cash).  PS Talk to your tax accountant to avoid/minimise Div. 7A loan issues.

 

Now for the details….

 

But first, some abbreviations used below:

> LVR: Loan to Value Ratio – the value of your loan to the value of your property (as estimated by your lender.  For most borrowers, the ‘magic’ LVR maximum is 80%.  Below 80% and there are no additional costs.  If your LVR is above 80% you either need to be in a special class or borrower (eg medico/medical, accountant/lawyer) or you may be charged LMI by your lender.

> LMI: Lenders Mortgage Insurance – an insurance policy you pay to an insurance underwriter to protect the lender in the event of you defaulting.  It is often applied when the LVR is greater than 80%.

> Equity loan (or cash out a loan):  when you receive cash as well as the loan to be financed to either purchase the property or refinance the current loan.

> CCR: Comprehensive Credit Report.  A report was prepared by a credit agency (Equifax, Illion, and Experion).

> DTI: Debt to Income Ratio.  The ratio of your total interest-bearing debts to your ‘assessable income’.

> Security: the asset used by the borrower to secure the loan from the lender.  For renovations it is property.  Only personal loans may look at vehicles as security.

 

Notes:

– You can obtain Cash out with an LVR over 80% with certain lenders and under specific circumstances.  Typically, LMI will be charged and other restrictions might apply.

– Depending upon the lender, the documentation required can vary from the usual documents required to get a loan plus a statement of intent or with some lenders, signed contracts.

 

Other observations:

– For people who generate surplus cash, offset accounts are a good way to save on interest.

– Selling investment assets (property, shares, artworks, etc.,) is a little bit like ‘robbing Peter to pay Paul’. Check with your financial advisor before proceeding.

– The amount you borrow in excess of your current home loan balance would be seen as an equity or cash-out loan by your lender (or a new lender). Some lenders require a lot more detail on the purpose of the cash out than others.  Some lenders require, for example, signed contracts for the expenditure whilst others only need a declaration of intent.

– Lenders have 4 main criteria when assessing a loan – and some lenders look at some more than others:

> Your ‘after-loan’ LVR.

> Your ability to service the new loan balance.

> Your resulting DTI. DTIs above 6 times start to reduce the number of available lenders but some major lenders will go as high as 9 times and there are some lenders who don’t use DTI.

> Your creditworthiness. Your CCR Score.:

1. A credit score of more than 700 is good and less than 500 is bad – and in between requires an explanation.

2. Defaults or judgments are not liked by many lenders.

3. Late payments of your current loans are not liked by many lenders.

 

– Personal loans typically don’t require security over your properties and for renovations, most would be unsecured.

– Personal loans have limited terms (typically 3 to 5 years) whilst an increase in a home loan that is refinanced is typically ‘reset’ for a 30-year term.

 

To summarise:

– To be able to fund your next renovation, there are lots of ways to obtain a renovation loan.

– You need to take into account the various issues impacting your situation and work through which option is most suitable for you.

– Like all loans, the longer you take to repay them, the more you will end up paying in interest.

 

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

  • PREVIOUS
  • NEXT
  • Share
Leave a Reply




    RELATED ARTICLES

    All things property and finance – 2302 feb 2023 issue

    All things property and fina...

    Hi, As summer comes to an end, the property market tends to kick into gear. There’s a lot of real estate news around right now, including these four big stories: - Building approvals trending down. - Rents rise as vacancies fall. - Real estate price update. - Australia sets a refinancing record. Read more below. But first.... Some things you might like to know! - The result…
    View More
    Curing inflation using interest rates?

    Curing inflation using inter...

    To cure inflation using monetary policy we have 3 groups of HEAVY LIFTERS (and the rest of us Aussies should be fine). Read on to find out if you are likely to be one of the RBA's heavy lifters. Some in the media are now (finally) saying that interest rates are a blunt instrument to cure inflation. Blunt might be an understatement. Let’s see what happens and who is impacted when interest rates…
    View More

    CONTACT

    • Office: 12-16 Parker Street Williamstown VIC 3016
      Mail: 16 Junction Street Newport VIC 3015
    • Ph: 1300 989 878

    LINKS

    • Our Philosophy
    • Contact Us
    • Services Policy
    • Website Privacy Policy

    Services

    • Residential Property
    • Commercial Property
    • Business Lending – Working Capital & Cash Flow
    • Personal Loans
    • Personal & Property Services
    • Business & Property Services

    Resources

    • Common Terms & Abbreviations
    • Useful Links
    • Business Referral Relationships
    • Financial Calculators

    BIR Pty Ltd ACN 117185654, trading as BIR Finance, Credit Representative Number 517662, is authorised under Australian Credit Licence 517192 held by LM Broker Services Pty Ltd ACN 632405504

    Disclaimer statement: This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. This page does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Where applicable, this page is subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

    If you have any compliments or concerns, please go to our Contact Us page.


      "The privacy of your personal information is important to us. By providing your personal information to Connective, you consent to be contacted by a representative of Connective from time to time for marketing purposes. We will use your contact details to send you direct marketing communications including offers, updates and newsletters that are relevant to the services we provide. We may do so by mail or electronically. You can unsubscribe from by notifying us and we will no longer send this information to you. For Connective’s full Privacy Policy, please refer to our website."

      <iframe src=”https://survey.zohopublic.com/zs/PPCNsh” frameborder=’0′ style=’height:700px;width:100%;’ marginwidth=’0′ marginheight=’0′ scrolling=’auto’></iframe>


      Contact Us

      If you’re busy and want a broker who cares about you and your future, reach out to us. We’re available when you are!


        "The privacy of your personal information is important to us. By providing your personal information to Connective, you consent to be contacted by a representative of Connective from time to time for marketing purposes. We will use your contact details to send you direct marketing communications including offers, updates and newsletters that are relevant to the services we provide. We may do so by mail or electronically. You can unsubscribe from by notifying us and we will no longer send this information to you. For Connective’s full Privacy Policy, please refer to our website."

        Thanks! Your email has been sent.

        Contact Us

        If you’re busy and want a broker who cares about you and your future, reach out to us. We’re available when you are!