Personal loan for renovation

Discussion in 'Loans & Mortgage Brokers' started by Christina46, 1st Jun, 2018.

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  1. Christina46

    Christina46 Well-Known Member

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    Hi all

    We are looking to undertake some renovations to our PPOR (about $150k value). Post-APRA we don't have the serviceability to access spare equity in our current properties nor to get a construction loan to fund renos.

    We were looking at selling another property next year to fund the renos, but husband is keen to get moving sooner if possible.

    We have some savings available that would we could put towards the renos, but not enough to complete. Brainstorming how we could move ahead the idea of a personal loan came up.

    Can anyone comment on how lender serviceability requirements for personal loans compare with home loans? Could this be an option for us even though we can't access any home loan funds?

    I have looked at our cashflow and am comfortable that we could handle the repayments, even though they would be higher than a home loan.

    We are looking at other options as well including staging renos, increasing incomes to improve serviceability etc.

    Thanks.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Not much of an option i think as the max personal loan would be $20k to $50k.
     
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  3. Christina46

    Christina46 Well-Known Member

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    With other cash savings, $50k would get us pretty close...
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Try Citibank's readycredit
     
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  5. chylld

    chylld Well-Known Member

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    To throw a random idea into the mix... if you have $50k of poorly-performing liquid assets (shares funds etc) that you could sell to realise a capital loss, and you have a significant capital gain to offset this financial year, then now wouldn't be the worst time to consider liquidating them.

    Personally what I'd do is stage the reno, only do the 1 or 2 things that will have the biggest impact on your day-to-day life, and take a balanced approach to invest the rest in liquid assets. Also make sure you are clear on what your safety buffer is; never ever dip into that cash.
     
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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Personal loans are shorter term so the servicing impact of 8.5% personal loan repaid over 5 years on P&I can be harsh in servicing calcs. Not unlike a car finance loan.
     
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  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Have you sussed out all lender options? Could you do a refinance/equity pull with one of the last remaining “generous” lenders? Only issue is that you’ll likely pay via a higher rate but that may not be such an issue if you’re considering a large personal loan anyway.
     
  8. Cia

    Cia Well-Known Member

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    I'm in a similar situation - due to low valuations from my bank. I'd like $25K for a kitchen reno that will add at least $50K value. I could refinance my loan but I might then have to pay LMI which isn't ideal. If I get finance for the reno, then the home value should increase so I can almost immediately refinance it into my current homeloan which is 3.69% so I'm reluctant to refinance from it. Any strategy suggestions welcome.

    Also my current kitchen is driving me nuts, its 50s and rundown in a 2.2 x 1.8m room and due to it being horrible I'm eating out way too much than cook in it.
     
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  9. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    What I used to do, was put the reno all on a credit card and then do a balance transfer to a 0% for 12 months other credit card or refi the new house value and pay off said card.
     
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  10. pinkboy

    pinkboy Well-Known Member

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    Tried P2P like Ratesetter?

    pinkboy
     
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  11. Christina46

    Christina46 Well-Known Member

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    Lots of interesting food for thought. Yes, definitely will go back and have a chat with our broker to confirm we've exhausted all property secured options.

    Credit card is an interesting idea, although our current limit wouldn't get us too far...would have to apply for a new card or significant limit increase.

    I'm comfortable with the higher repayments on a personal loan (fit comfortably into current cashflow), and understand the impacts that these could have on serviceability for any further property loan applications (we aren't planning any new purchases prior to a major re-jig of current portfolio).

    What I'm hearing is that it may be possible to get a "yes" on an unsecured personal loan even though we (probably) can't get any additional long term, property secured loans.
     
  12. neK

    neK Well-Known Member

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    Have you considered going to a non bank lender such as Pepper to access the equity?
     
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  13. Christina46

    Christina46 Well-Known Member

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    Yes - will discuss this option with our broker. I am reluctant to go down this track and tie up a property with and move existing borrowings to Pepper given we would be paying higher rates on the total borrowings, and our options to move away from Pepper in the future may be limited.

    Perhaps says something about my mindset that I'd be more open to considering Pepper if it was to take advantage of an investment opportunity - not so keen just to make our PPOR a bit nicer (it is still doing the job of keeping us warm and dry, although I relate to @Cia's kitchen frustrations!).

    At the end of the day waiting 12 months to start renos is not the end of the world (although there are a few smaller updates that we could start sooner with a smaller bucket of funds).
     
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  14. neK

    neK Well-Known Member

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    You can always temporarily refinance to Pepper and once you're done (and pay down that part of the loan), you can move back (or move back when you get a pay rise).

    Pepper rates don't seem too bad, if you look at a reseller of pepper, its even lower (so the difference between Big4 and reseller of pepper is about 0.30%.

    That said, it depends on your overall borrowings, so crunch your numbers to make sure you actually end up being better off.
     
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  15. Christina46

    Christina46 Well-Known Member

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    What do you mean a reseller?
     
  16. neK

    neK Well-Known Member

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    Pepper sells pepper loans.
    There are other lenders that resell pepper products that offer a honeymoon rate that is 0.2% lower than the rate pepper offer. This rate is usually only lower for 1-2 years, after that it goes up.
    If you think you can refinance out in 1-2 years due to increased salary or lower debt levels, this may be an option if you're rate sensitive.
     
  17. Christina46

    Christina46 Well-Known Member

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    OK, thanks.
     
  18. Cia

    Cia Well-Known Member

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    homeloans.com.au is a pepper reseller
     
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  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    150 k ....
     
  20. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    Plus a bit. Don’t ask.