Personal loan for renovation

We are in a similar situation to the OP. Looking at renovating our house and we're currently about $40 - $50k short. We could possible refinance with another lender to access the available equity, but the refinance costs, and potentially locking into a higher overall interest rate, as well as the hassle involved would mean i would be prepared to take on a personal loan at a 10 - 14% interest rate, especially as I would be able to have it repaid in 12-18 months.

Is there any knowledge on how banks assess serviceability for personal loans?

Given the short term nature, would they just take existing debt repayments as actual rather than loading up to 7.25% P&I?

I'm not concerned about the impact of a personal loan on my future serviceability as we will repay it quickly and I have no intention of obtaining a new loan any time soon.

Yes, I could wait the 12 months to save up, but we would like to get the renovation started sooner.

Ben

 

What is your intention with the property?
Do you intend to sell it as even with a personal loan you would need to eventually clear the debt.

If sale is an option post renovations then a Nodoc secured second mortgage might be an option if you have equity but traditional servicing is a problem.

Cheers

 

Hi our intention is to stay in at least the next 5 to 7 years or longer

 

Ok strike out a Nodoc loan then as the term is > than the maximum term allowable under the Act.

Cheers

 

I would be looking to clear the debt in 1 to 2 years

 

Ok still not doable then as the initial term would be longer than that.

Cheers

 

When you say the overall cost of refinancing - most lenders are offering pretty decent cash backs for refinancing (circa $2k -$2.5k) so that will more than cover your refinancing costs and you will have funds left over from the refinance.

Re the high rates - again lenders are sharpening their pencils for new clients so I dont think it would be higher than what you are paying now.

Can't comment on the hassle part but its a lot less strenuous than trying to get a personal loan and potentially being knocked back or approved for a much smaller amount than having to go back to trying to do the equity release. There also isn't the pressure of having to pay it off within 1-2 years.