Top 3 ways to finance your renovations

Are you considering renovating? If so, you’re not the only one, because renovations are incredibly popular, with homeowners investing $2.84 billion on alterations and additions in the June 2024 quarter, according to the Australian Bureau of Statistics. Typical costs range from about $2,000 to $5,000 for bedrooms, $15,000 to $30,000 for bathrooms and $25,000 to $50,000 for kitchens, according to JDL Constructions.

Here are three ways to finance your renovations:

• Take out a construction loan. With a construction loan, the funds will be distributed in stages throughout the project, rather than in an upfront lump sum, and you’ll be charged interest only on the funds you’ve already received. Your construction loan will be interest-only during the building phase and will then revert to a standard principal-and-interest home loan once the building has been completed.
• Take out a personal loan. Compared to a construction loan, the application process is likely to be faster and your chance of approval is likely to be greater, but your interest rate is likely to be higher as well.
• Pay cash. This is the simplest option.

If you’re thinking about paying for the renovations with a credit card, please be careful, because while you will not have to go through an application process, the interest rate will be extremely high and could leave you susceptible to falling into a debt trap.