how would you organise your loan for ppor renovation

Hi guys

This is going to be my first loan of any kind after paying off the ppor , annual gross of 120567.00, wifey not working atm

PPOR fully paid off and loan is closed

No other loans

Question : I am planning to go for renovation loan on my ppor , what would the loan structure be and what would the product be called .. Is it equity loan or Loc ... novice to all these ...

As I understand it would be separate account - would it have an offset account attached if need be ?.

As the ppor is both on our names , I understand that the renovation loan should need to be both on our names ?. ... Is that correct

what are the interest rates for these type of loans

thanks heaps guys

 

Depends on a few things.

A LOC might be good as you can pay for expenses from the loan account and this will help tax deductions if the property is ever rented.

Once drawn it should be converted into a PI or IO loan with offset.

If tax is not a concern then a PI or IO loan with offset from the start.

But it depends on how much of a reno you will do and the lender's cash out policy.

Normal rates around 4%

All owners need to be on the loan.

 

+1 see above.

 

Thanks terry

I am thinking more of loc as the property might be rented out in future with an offset account

Just wondering if the interest rate would be higher for a loc loan and the lending criteria different ?
Do I have to submit reno plans and all that at any stage or not necessarily

Thanks
Can do it

 

Yes higher rate and lending criteria. Convert it after use to an IP loan.

 

Hi Terry

Hm that's something to definitely think about how soon the pprop might become an IP before deciding on either loc or equity loan

Just Wondering either for loc or equity loan whether its a minor reno or medium sized reno do I need to provide reno drawings or any related paperwork when applying for loan or after the loan is approved

Your response is much appreciated

Can do it

 

Depends on the lender and loan size

 

If you have a loan against your PPOR say 200k and you wanted to do a Reno of say 200k.

Is their any issue in just doing a loan top-up (funds into an isolated offset account) to bring the loan to 400k?

I would imagine not as the purpose of the Reno is related to the PPOR should it become an IP in the future.

Just trying to think if their is any value in splitting the loans out.

 

@albanga

The ppor is completely paid off and the loan account is closed

 

Hi Terry

thanks

thinking of borrowing around150K for the Reno, just wondering who would require the Reno paper work and who wouldn't among the big 4

thanks

can do it

 

Try AMP, few questions asked. NAB too.
I think Westpac and CBA are asking more questions now, or maybe will be soon.

 

Definitely some lenders which are good in this space - no evidence required for cash out, competitive rates etc. It will all come down to serviceability and the long term plans which pathway to go down - don't just pick your lender based on rate.

If the property is potentially going to be used as an investment property in the future, keep the loan interest only.

 

Most lenders need a fixed price contract if you are relying on borrowing increased equity from the Reno. For example house now worth 200 after 150 Reno worth 400 then you need to provide contract.

If there is borrowable equity available most lenders would still want to see a building contract especially if the works involved anything structural.

Like Jamie said above if you don't want to provide a build contract then choose your lender wisely.

 

Who doesn't ask questions beyond AMP?

 

They all 'ask questions'.
Some are happy with different levels of verification. Some accept a note in the application others will condition for a signed contract or similar.

Not being clear about a Reno isn't a great idea. The mortgage docs are pretty clear about advising of any changes. A big Reno is a change you should inform the bank of.