Recently I sat down for a coffee with Mandy Taylor and Greg Wilkinson from Smart line mortgage advisers to chat about what it takes to obtain finances for a renovation project. I fired a few questions at them that I thought would be beneficial for first time renovators and owner builders.
But before we jump into the questions let’s learn a little more about Mandy and Greg.
Mandy grew up in Scotland and from her early teens helped her mum in the local building society working with customers to help them buy their first homes. After moving to Australia in 1991, she has worked with companies such as CBA, St George and Bank of Queensland heading up lending teams throughout the North Shore and Northern Beaches & Greater Sydney Region.
When she’s not working with loan clients, she’s marrying them in her capacity as a marriage celebrant….. one of the few women who marry a number of men each year….to other women!
If she’s lucky to have spare time, it’s spent in the garden, fishing or sharing quiet time with her partner and adult kids.
Greg has spent all his life in Sydney and grew up in the Ryde area. Worked for CBA and spent a short stint with Bank of Queensland before becoming a loan writer for another franchisee. Decided over a year ago to become principal of his own franchise of Smartline Personal Mortgage advisers and has never looked back.
Greg is an avid NRL Bulldog fan (don’t hold that against him). Loves his cricket, golf and plays recreational baseball with a couple of teams in Sydney. His favourite food is sausages and he reckons a good aussie beef snag covers all 3 food groups every day of the week!
If an owner builder wants to obtain finances for their construction project here in Australia, is there any particular steps or processes they need to follow to apply for this type of finance?
Preparation….preparation…..preparation and articulation are key! Before sourcing finance it’s imperative to get informed about the different licenses required from the various government pages.
In terms of lenders and what they may be looking for:
- A copy of your detailed project.
- Resume of you and those you intend to employ to help you complete the build.
- Your building plan with specific costing involved.
- Estimates and quotes for work to be completed.
- Timeline of your build (they prefer 12- 18 months max).
- Extra funds you may have to complete the build if you go over budget.
Few lenders will lend for owner/builders and those that do often may reduce the LVR (loan to value ratio) as low as 50%. Part of preparation and planning is to speak with a broker to find out the difference ratios for lenders who will lend for owner/builder projects.
What other types of finances and options are available for people who are looking to renovate their home?
Some renovations may not be extensive or require building licenses etc. Depending on the cost, you may simply need a ‘top up’ on your existing (eg $50,000) home loan which can be done relatively quickly or if a small amount perhaps a personal loan would suit (less than eg $10,000).
If neither the top up or personal loan is enough for you to renovate, then using the equity in your home to access more cash may be the way to go as long as the repayments can be made and other criteria met. Each loan would be on a case by case basis.
Some lenders will cap the amount of cash out required as well as stipulate maximum LVR.
What advice and tips would you give someone who is obtaining finance for their first renovation project?
- Speak with a broker and find out first of all the likelihood of being able to obtain the funds and how to go about it. Whatever the amount is, it’ll help you work out a budget. Knowing what you’d like to do versus what’s financially possible could impact your plan either way.
- Plan the renovation and speak to experts well beforehand.
- Plan the budget and costs, get quotes.
- Add extra into the budget to allow for the ‘unforeseen’ problems/issues.
- Depending on the type of renovation, take into consideration the time of year and expected delays – this can often cost more as you may need to employ more people to get job done on time.
- Research on following links as a starting point to help guide you –
What pitfalls should people be mindful of when obtaining any type of finance?
- “Do your numbers” and don’t stretch yourself to the maximum leaving you short of cash if something goes wrong.
- Speak to a broker as they have more lenders to choose from that your local bank, don’t feel ‘stuck’ with your own bank.
- Speak with a broker who has experience and not just out to make a quick sale at your expense.
- Whatever you’re obtaining finance for, if you can’t afford it, look at alternatives as the financial stress isn’t worth it, you may need to change your strategy and ideas.
- Seriously consider life, income and loan insurance. Most people assume their insured via their superannuation but not necessarily and at the end of the day, bad things happen to good people. No point being over insured, however to ignore it is working on the ‘hope nothing goes wrong’ basis.
- Ensure you don’t have to live on bread and water budget over the next 10 – 30yrs in order to get the amount you want – be realistic.
- NEVER FEEL THAT YOU’RE BEING RUSHED INTO SIGNING UP FOR A LOAN nor that “you’ll get that investment quicker as I can get my ‘loan person’ to sort you out right now.”
- Stay in control and avoid getting emotionally attached to the ‘item’ you need the loan for.
Do you have any tips & advice for first time renovators?
We cannot stress enough the importance of the following:
PLAN……PREPARE…..RESEARCH….ASK ADVICE OF EXPERTS ….RESEARCH SOME MORE ….BE REALISTIC
Well there you have it, some great advice from Mandy and Greg, and a big thanks for the time to answer some of my questions guys, much appreciated!
If you have any questions or stories related to finance please feel free to drop them in the comments section below or contact the guys directly and I’m sure they will be more than happy to help out if they can.
Till next time, happy renovating!