Home renovations can be transformative. It can boost your living experience and potentially increase your property’s value. Now, the costs associated with renovations can be significant. This can eat into your savings if you try to do this without the help of financing. This is where options like an equity release can come in.
If you’re thinking of renovating your home and want to try using an equity release to do this, this article is for you.
What Is Equity Release?
Equity release is a financial product designed for homeowners to access the equity accumulated in their homes without the need to sell their property. This enables them to convert a portion of their property’s value into cash. This cash can then be used for a variety of purposes. Some of the reasons cited when an equity release is processed include home renovations, travel and more. When approved, an equity release is awarded to the homeowner in a lump sum.
How an Equity Release Works
So, how does equity release work? Equity release through a cash-out refinance allows homeowners to access the built-up equity in their property by increasing their home loan. This type of equity release is often used for significant expenses, like those associated with home renovations. To secure an equity release, homeowners generally follow these steps:
- Determine Your Equity – First, calculate how much equity you have by subtracting your outstanding mortgage from your property’s current market value. This will give you a baseline for how much you could potentially borrow.
- Loan-to-Value Ratio (LVR) Assessment – Check with your mortgage broker about maximum LVRs, which dictates the percentage of your home’s value you can borrow. Many lenders allow up to 80% of the property value, minus any existing loan balance.
- Property Valuation – Arrange for a property valuation to confirm the home’s current market value. This ensures that the equity amount aligns with most lending criteria.
- Submit Financial Documentation – Provide income, expense, and credit history documentation to prove your ability to manage the increased loan amount.
- Approval and Loan Adjustment – If approved, your home loan balance will be increased in the form of an equity release cash amount. This amount is typically added to your existing mortgage, and you’ll start making repayments on the updated loan balance.
These steps can be easily accomplished with the help of an experienced mortgage broker. Homeowners can unlock funds for their needs via an equity release – maintaining ownership while leveraging the value of their property.
Benefits of Using Equity Release for Home Renovations
Using equity release to fund home renovations has several potential. Here are some of them:
- Potential Increase in Property Value – Renovations, such as modernising a kitchen or updating a bathroom, often increase a home’s market value.
- Energy Efficiency Improvements – Use funds to install energy-efficient appliances, windows, or solar panels, potentially lowering utility costs long-term.
- Personal Enjoyment and Satisfaction – Upgrading your home can enhance your daily comfort and enjoyment, allowing you to truly love where you live.
- Reduced Maintenance Costs – Renovate worn-out areas to reduce the need for frequent repairs and maintenance, saving time and money in the future.
With equity release, you can fund these improvements and potentially offset some or all the borrowing costs when the property’s value increases, enjoy your home more, or have a more energy-efficient residence.
Ask ZEP Finance About Home Renovations Using an Equity Release
Using an equity release to finance home renovations can be a viable and convenient option for homeowners who wish to enhance their property or living space. It’s essential, however, to carefully consider the associated risks. Check the impact on remaining home equity and potential changes in property value.
Seek advice from professionals, like our mortgage brokers here at ZEP Finance, and understand the terms of these equity release products. This way, you can make an informed decision that aligns with your long-term financial goals and renovation plans. Contact us today to learn more about this option for your home renovation plans.
After studying business and finance at university, Zain initially expected to pursue a career in finance. However, his passion for property and the experience of buying his own home led him to mortgage broking. He began his mortgage brokering career in 2009 and founded ZEP Finance in 2010.
