We have strong equity in our home and a smallish mortgage. We want to renovate and remortgage but without increasing the repayment amounts or duration of the loan. Can this be done?
Hi there MJ Z
Congratulations on having strong equity in your home! Generally when you increase your loan amount your repayments will naturally increase.
However when looking at specific circumstances there are a number of factors that would need to be considered to see if what you are trying to achieve is possible.
Firstly the actual increase required will certainly determine if it is indeed possible but below are factors that can certainly help you reduce the increased cost and perhaps cover them all together.
If you are making voluntary additional repayments above and beyond your current minimum loan amount then this additional repayment could cover the cost of your renovation instead of accelerating your current home loan.
Comparing your current interest rate to what else is out there in the marketplace. A reduction of interest rate on your current loan can mean the savings made can go towards the renovations.
Thirdly if you have personal loans or other debts with a higher interest rate that could be consolidated onto your mortgage this will help your cashflow and the savings made will go towards the renovations.
I hope this answers your question.
Hi MJ Z
You raise an interesting question and whether it can be done or not will be based on your current home loan balance, how much you need to renovate and your current interest rate.
When you borrow additional funds, it means your monthly repayment will increase. You could indeed limit the increase by shopping around to obtain a lower interest rate and as an indication there are some lenders in the market offering rates as low as 3.99 – 4.19% on owner occupied loans.
In regards to the term of the loan if you wanted to keep the repayments as low as possible you might need to extend the term of the loan. This might not be desirable so you need to weigh up the pros and cons of renovating v keeping the repayments and loan as is. To help you with your decision making process play around with a few home loan calculators and use the interest rates previously mentioned as a guide to what the repayments might be or contact a finance broker.
The pleasing thing is you do have options – best of luck
Hi MJ Z
Great question. Awesome news about having strong equity.
Unfortunately there is no quick simple way of doing this without increasing your loan or the repayments.
If you increase the loan you will either have to, a) Increase your loan repayments or b) Increase the term of the loan.
This would be a good opportunity to do some research on the what rates are available to you at the money as you many find that you will be able renegotiate the rate that you are currently saving.
I hope that this helps.
Hi MJ Z, the short answer is probably yes but it will obviously depend on how much you need to borrow and what the value of your security is. Lenders generally price their loans on loan size and loan to value ratio. A Mortgage Broker is s good place to start as we have access to multiple lenders and are generally aware of all the different offers that are available. Cheers, Rob