Whether you’re renovating or building from scratch, our custom home builders in Pakenham love seeing new plans and the creative ways that people want their homes built. It’s an exciting time, but it can be quite overwhelming if not managed correctly. One of the areas that can be a handful if not thought-out from the get-go is how you’re going to fund your project. There are a few different ways you can fund your home’s construction or renovation and we’re going to be highlighting them in today’s blog to give you a better idea of how to approach it.
Using personal funds
The obvious method would be to finance the project using your own funds. The benefit of this is that you won’t owe any money and you can control it pretty rigidly since it’s your own money. This also means that any unforeseen hiccups in making the money available via other methods are less likely to occur since it’s all already available to you. You may even consider combining your own funds with one of the following methods – the best method to use will depend on your individual situation.
Redrawing from your home loan
It’s important to remember that not all home loans have a redraw option – but if yours does, then this is a great option. Home loan redraw is any extra payments you’ve made on top of your minimum repayments – so the amount of redraw you have will depend on the extra payments you’ve made. A major benefit of redrawing is that it gives you access to your money quite quickly.
Use your equity
Equity is the difference between what the bank has valued your house at and how much you still owe on your mortgage. You usually aren’t able to borrow the full amount but you can definitely borrow a large chunk which can be helpful.
Your equity will change over time as you pay off your mortgage and your property’s value increases. Interest rates on your equity can be quite low, which will be helpful when paying it off – however, this also means you’ll have a larger mortgage which is something that needs to be considered.
Enquire about a line of credit
A line of credit is incredibly easy to use as it allows you to draw funds when you need them to pay your custom home builders and materials – instead of withdrawing all the funds at once. This makes it a lot easier to manage the funds instead of getting overwhelmed with a large sum of cash.
The greatest benefit this method holds is that you’ll only owe interest on the amount that you withdraw instead of the entire amount of credit that’s available to you. This also acts as an incentive to only withdraw what you need.
Consider a construction loan
A construction loan is a special type of loan designed specifically for those that are building or renovating a home. It’s designed around the construction process and structured to be accessible and simple. A feature of a construction loan is that you can progressively increase the amount of the loan as you need it.
Construction loans are closely tied in with progress payments. What are progress payments? Essentially, they’re payments that are made to the custom home builders when different stages of the construction are completed. Similarly to a line of credit, the interest is only calculated on the funds that have been withdrawn as opposed to the entire sum.
Look into a personal loan
Personal loans can be quick and easy ways to get money out, but some personal loans may not be good for larger projects and will usually only suit smaller renovations. That being said, there are still personal loan options that can fit larger renovations as well.
You’ll receive the whole sum at once and as a consequence, any interest that is gained will be off of the full amount. There may be fees associated with taking out a personal loan – but interest rates may also be fixed for the period of the loan which can come in handy.
Are you looking for custom home builders in Pakenham?
With over 35 years of experience, S & B Lamble Builders can offer you high-quality and luxury residentialconstruction services. Our custom home builders thrive on delivering premium solutions and bringing your dream home to life. Have you got an idea for a custom home or renovation? Submit a tender to us.
If you’d like to get in touch with our Pakenham-based custom home builders, then please don’t hesitate to call us on (03) 5941 8135 or fill out the contact sheet on our website.