How to get a home improvement loan without equity

There’s just one, significant, problem – you’ve got no equity to borrow against! You’ve only been making repayments for a short period and your property hasn’t had a chance to grow in value. Normally, you’d borrow against the equity to renovate a home, but that’s not an option for now.

That’s OK, all is not lost. Borrowing without equity is possible, but you need to know what your options are and which loan products offer the best features for your particular situation.

Let’s explore what those loan products might be.

A personal loan will require a good credit score and regular payslips, but if you have a mortgage then it’s likely you’ve already got these particular ducks in a row. The bank would have taken your credit score and employment history into consideration before deciding to lend you the money to buy your house.

Something to be aware of is that the interest rates for a personal loan will be higher than the interest rate on your mortgage, but it could be the fastest way to get the cash flow required to fund some emergency renovation work.

An unsecured line of credit will have a higher interest rate but won’t require the collateral or the equity that a secured line of credit would require. If you don’t have any equity yet in your property, but are looking to fund some home improvement work, then this may be an option you could consider.

A line of credit offers flexibility with the amount you borrow and interest will only accrue when you’ve drawn funds down on the facility. The repayments are flexible too, allowing you to control your cash flow, within reason. You can use it to pay contractors and it can be a very handy credit product if you use it wisely.

Full stretch: If your financial situation is at capacity – that is, with no additional surplus to redirect towards the larger loan repayments – then borrowing now to renovate may not be the best idea. Are the renovations critical? Are there personal avenues open to you? Perhaps a relative could lend you the money, such as the Bank of Mum and Dad?

Expert advice: There’s a lot to consider when adding to your debt level. Your income is likely to be fairly stable and static for the moment (or you wouldn’t have got the mortgage!), so what other elements need to be taken into consideration when thinking about adding more debt? An expert can help you decide how to proceed. It may seem like having no equity is a problem, but with expert advice, in most cases, it can be overcome.

This approach was vindicated when we were named Victoria’s Best Finance Broker at the 2017 Better Business Awards.

So if you’re considering investing in, or developing, property, why not contact Intuitive Finance’s mortgage brokers today to ensure you have the right information and expert support on your side no matter what stage of the property ownership journey you are on.