Page 18 - Smartline eBook - Upgrading your home
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2. Loan refinance
If a loan top-up doesn’t provide you with the funds you need, isn’t allowed by your existing lender, or you want to change lenders, you might consider a loan refinance. Refinancing means you pay out your existing loan and take out a new one with a different lender.
3. Redraw – renovations only
Redrawing from your current home loan may be an option if you have previously made additional repayments on your loan. The amount you can redraw depends on the amount you have repaid during the term of your loan. Not all loans have a redraw feature and fees may apply.
4. Line of credit – renovations only
A line of credit is a pre-approved limit of funds you can borrow using the equity in your home. You can access the funds easily when you need them and interest is only accrued on the portion you use. In addition, you typically don’t need to make regular repayments while you remain beneath the credit limit. Interest rates are usually lower than for a personal loan, although there may be fees attached. You’ll need a good credit history, a stable income and excellent financial discipline to use a line of credit successfully.
5. Personal loan – small renovations only
If you don't have enough equity in your home to increase your loan amount and you don't have a redraw facility, you may need to consider a personal loan to fund your renovation. This tends to only be suitable for smaller renovations, and you will need to have a cost estimate in place before you apply. Interest rates and loan repayments tend to be high as the loan involves unsecured credit and the loan term is shorter.
6. Construction loan – knockdown rebuild or large renovations8
Construction loans are often the best option for a knockdown rebuild or a major renovation. Rather than a lump-sum payment, construction loans have a progressive drawdown, meaning your lender releases a portion of the loan funds as required at each stage of the construction process. Interest is only charged on the amount drawn down and repayments are usually interest-only during the construction period. The lender may send a valuer to inspect the build at each stage of construction to ensure work has been completed to a satisfactory standard before making payments.
Online finance calculators:
Smartline has a range of online calculators to help you make estimates and comparisons while you are deciding which loan to choose.
Upgrading your home 8. www – Smartline Construction Loan Fact Sheet

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