Finance options for renovating your home

In today’s ever-changing economic landscape, homeowners are increasingly interested in exploring cost-effective measures to renovate their homes. With the rise in interest rates, inflation control measures, and power and water restrictions, individuals want to enhance their living environments while sustaining or improving their quality of life. So, let’s dive into some practical finance options for your home renovation project.

The Changing Needs of Homeowners

After the Covid-19 lockdowns, homeowners realized the importance of having a versatile living space. Many opted to add a home office, a gym, or even a granny flat to generate additional income. Others focused on creating more privacy by expanding their patios or entertainment areas and adding swimming pools or alternative power and water sources. These changes were driven by the need for a better living experience within the confines of one’s own home.

Updating for Increased Property Values

Another significant consideration for homeowners is the impact of renovation on property values. Many individuals who chose to downsize or upscale discovered that their homes required updating to attract a broader market. This realization prompted them to explore architectural and interior design options, such as changing cabinets, doors, and light fixtures, or even removing walls to create a more open-plan living space. By investing in renovation, homeowners can increase the appeal of their homes in a competitive real estate market.

Renovation Potential for Buyers

Some buyers actively seek out properties with great renovation potential. They envision transforming a neglected or imperfect home into their dream space that suits their unique lifestyle and preferences. These buyers are willing to invest in renovations to achieve their vision.

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Julian Pick, National Manager Credit Lending CVM Home Loans Value Analytics at Absa, explains that there are multiple ways to finance your renovation project. If you have savings, you can tap into them. However, if this isn’t an option, you can consider a further advance or a re-advance on your existing mortgage. The amount of funding available will depend on the scale of your renovation project.

Creative Financing Options

Absa clients have an additional advantage if they have deposited extra funds, such as bonuses or inheritances, into their mortgage accounts. These accounts transform into a Flexi Reserve, allowing homeowners to access these funds for renovations. In addition, some companies allow employees to borrow against their pension funds, while stokvels (community savings clubs) offer opportunities to raise funds for renovations. Furthermore, there are FLISP grants available for renovation projects.

It’s important to note that financing options, including bank loans, are contingent upon your financial standing. Lenders assess factors such as credit checks and your ability to manage financial obligations. They also evaluate whether your renovation plans align with the property’s value in its location. Municipal authorities must approve the building materials used, and proper documentation, such as building plans and zoning approvals, is necessary.

Renovation Finance Application Process

If you’re in the market to purchase a fixer-upper, you don’t have to wait to apply for finance. You can apply for additional renovation finance simultaneously with your home loan application. This way, the additional funds can be included in your overall financial arrangement. Once the property is transferred into your name, you can proceed with the renovation finance application.

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When applying for renovation finance, banks require quotations from various sources. This documentation includes approved building plans, reports from architects and land surveyors, and the completion of standard application forms. Engaging with an Absa bank representative can provide valuable guidance and streamline the application process. If you’re applying for a re-advance through a Flexi Account, the funds are usually available almost immediately. However, in the case of a further bond application, access to funds is only granted once the new bond is registered.

Financial Preparedness and Value Considerations

To ensure a successful credit application for renovation finance, it’s crucial to do your homework and plan your budget accordingly. Conducting a credit check on yourself, building up savings for emergencies, accounting for future interest rate hikes, and consistently meeting financial commitments are vital steps in the process. Consider potential scenarios, such as school fee increases and changes in rates and taxes. Ultimately, your renovation should add value to your home, either for your immediate benefit or for future resale potential.

Remember, renovating your home is an exciting journey towards creating your ideal living space. It’s an investment that enhances your quality of life while potentially increasing the value of your property. For more financial tips and guidance, visit Simple Money Tips – Steps To Financial Freedom. Happy renovating!

Writer: Kerry Dimmer