Home Improvement Loans
What to watch out for.
An American term that has now reached Australia, it is really a renovation loan not tied to the home mortgage. As generally there is no collateral attached to the loan, the interest rate is higher and the loan amount will be smaller. e.g $10,000 – $80,000.
Now, if the loan is to ‘dress up’ the home for sale. The owner needs to be aware of critical insurance issues before starting.
Firstly, check with your Home & Contents Insurer that they will continue to insure the house during the renovation. This includes public liability cover, theft or damage to the existing part of the house. Especially if the renovation is opening the house to potential water damage (get it in writing!) If not, you will require Owner Builder Construction & Public Liability Insurance. To cover not only the renovation (home improvement) but also the existing part of the house.
Owner Builder Construction & Public Liability Insurance covers Fire, Theft, Storm & Water Damage, Vandalism & Public Liability.
As the Home Improver, it is vital that your major asset is fully protected in the event of an unforeseen event.
If the house is to be put up for sale and it is in Victoria, there is a requirement that a defects Inspection Report is supplied. To the purchaser and if the value of the work is over $16,000 then Owner Builder Warranty is also Mandatory. Your conveyancer/solicitor will be aware of these requirements.
In Victoria, if you are not using a registered builder, you are an Owner Builder. As there is no category in the Building act called Renovater or Home Improver. So the work is treated as being done by an Owner Builder.