Whether you're planning a kitchen fit for a master chef or building a playroom for the kids, here's what you should know when applying for a home renovation loan.
Victorian, weatherboard, Art Deco, bungalow or townhouse - it's the great Australian dream to buy a house. The home is where memories are made, children grow and life's big moments are celebrated. One could also argue the second Australian dream is to renovate our homes: inject our personality to create spaces that reflect our lifestyles.
To help you with your own home improvements, we spoke to an expert at Latitude Financial Services to give you a better picture of their home renovation loan.
Q: Are there any big financial 'watch outs' when planning a renovation?
A: Yes. Like with any significant financial undertaking, planning and budgeting are essential. The more research you do to better understand what things cost, and how long they take, the better you can manage the project and keep things in budget.
Q: What type of renovation is this loan used for?
A: The most common scenarios we see are upgrading the kitchen or bathroom, and building outdoor areas such as decks and swimming pools. We're now also seeing this loan used for landscaping - Australians love their backyards.
Q: Why could a renovation loan be a better option than a credit card?
A: The fixed rate for the life of our personal loan over a fixed term helps our customers plan and budget more precisely. Customers may enjoy a lower annual interest rate with a personal loan over a credit card, although interest rates range depending on a number of factors.
Q: How long do I have to pay off the loan?
A: You'll have between two to seven years.
Q: What's the process when it comes to getting a renovation loan?
A: The process for a home renovation loan is exactly the same as applying for one of our other loans. If you've never applied for one before, here's what to expect:
- You apply for the loan online or over the phone.
- You receive an application outcome: unconditionally approved, conditionally approved, referred for further assessment or declined.
- Latitude assesses the application in greater detail and may ask you for documentation (e.g. proof of income and identity).
- The loan may need to go to underwriting for further assessment (i.e. if you want more money than we can easily approve or if you have a complicated situation).
- We will contact you to discuss the outcome.
- If approved, you will receive a copy of the contract which can be accepted online.
- The home improvement loan will settle and the funds will be cleared within 1-2 business days. Funds from a settled loan will typically be deposited into your nominated bank account.
Q: If I spend over my approved loan amount or there are unexpected costs in my renovation project, can I request to borrow more?
A: Yes. You can do this by refinancing. However, approval is assessed on a case-by-case basis.
Q: Do I need to show Latitude the renovation I'm planning to apply for the loan?
A: Sometimes. We may ask for information as part of the loan process, however it's not normal practice to ask for supporting documents like permits. Ultimately, it's up to the underwriters' discretion if they believe it's required.
Q: Since shows like The Block and Reno Rumble, have you seen a rise in renovation loans?
A: There's certainly a steady flow of people enquiring about loans to renovate their home. I believe this would be true regardless of reality TV shows.
It's a very Australian thing to do a home 'reno' - and it occurs at different stages of our customers' lives. Some first homes are bought as a 'fixer-upper' and the owners want to renovate before they move in. Other customers have been in their family home for decades: the kids have moved out and they have the time to finally give their old kitchen a makeover.
Our new product, the Latitude Low Rate Personal Loan is really well suited to those who are planning a renovation.
It offers our lowest rate to new personal loan customers who own their own home or have a mortgage, have an excellent credit rating, and want to borrow $20,000 or more.
Q: Do you have any budget advice when planning a home renovation?
A: Yes. After you've estimated your total renovation cost (tradesmen, permits and materials), jump on to Latitude's repayments calculator to see what your repayments could be. This will help you better plan and budget.