One of the most common ways to fund a renovation is through equity built on an existing home loan.
Simply put, equity is the difference between a bank’s valuation of a property and the amount of money a person owes on a home loan. This builds up over time because the value of a property increases and the balance of a home loan decreases.
Using equity will help you avoid the additional costs of creating a new loan, however if you increase your LVR by over 80% you may have to pay lender’s mortgage insurance.
To discuss the pros and cons of adding renovation costs to your current home loan reach out and we’ll talk.
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