Outgrown your home? The crucial question arises: should you renovate or relocate?
Part 1 - Renovating
Buying a house, especially one to become your home, is a monumental and often emotional decision—a once-in-a-lifetime experience for many. If your lifestyle has outgrown your current property and you have the means, making the right choice can mean the difference between greater financial success and risking your investment.
When your home no longer meets your needs, the primary decision is whether to enhance your current property or buy a new one by either selling or converting your existing home into an investment.
Today, we’ll explore the financial aspects of renovating—how to fund a renovation and what considerations to take into account before starting major changes.
Renovation Loans
If you choose to improve your current property, you'll likely need financing for the renovation. Instead of refinancing your home loan, you can apply for a loan specifically for the planned improvements. Lenders categorize this as a construction loan, covering everything from new builds and full demolitions to minor extensions or reconstructions.
Key factors to consider for construction loans include:
- The borrowing capacity is determined by the estimated post-renovation property value, known as the "On Completion Value." This value, along with other standard criteria, influences your borrowing limit. Lenders will also review:
- Your building contracts
- Current property valuation
- Scope of the renovations—whether major structural or cosmetic
- Comparable properties in the area
- Standard lending criteria like financial position and assets
Remember, if you have questions about borrowing capacity as a medical or dental professional, and the special requirements or concessions available, contact the BFD Finance team today.