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Your Complete Guide To Home Renovations And How To Finance It

There’s only one Aussie dream that comes close to owning your own home, and that is renovating that home. With reality tv shows on our screens showing us what’s possible over the years, we are now a nation of renovators. Savvy homeowners have been taking advantage of the hot property market to not only sell up big, but also to access equity so they can renovate their homes. We have put together this how-to guide for home renovations so you can make the most of this hot property market before it’s too late. There is an inkling that a downturn in these historically high house values may just be around the corner. Even if it’s only a minor downturn, that means less equity you could draw on to fund those dream renos. Now is the time to access your equity to fund your home renovations.

TO SUM UP: Ask yourself why you are renovating (if you want to sell or continue to live in the property) as your answers will guide how big the home renovation project is and how much your budget is going to be. You can finance a home renovation project through savings, a personal loan, a construction loan or by refinancing your mortgage. We recommend working with professional mortgage brokers to get the right loan for you.


Questions you need to ask before starting

How much do Australians usually budget for a home renovation?

What to renovate to increase your property value

How do you know if your renovation has gone overboard?

DIY home renovation guide

How to finance your home renovation

Questions you need to ask before starting

Renovating your home can be exciting. It can also be stressful, exhausting, expensive, and time-consuming. Before you start buying tiles or building walls, make sure you have a clear picture of what you're trying to achieve. Also, it pays to have a clear plan about how you plan to pay.

1. Why renovate?

Renovating because you want to sell the property for a profit, to improve capital value, or simply for the mere enjoyment of it will influence the decisions you make before even starting the project. If you’re renovating for capital value, your design will more likely be less of your preference (you want to appeal to the broadest market) compared to if you’re renovating to make your home more liveable for you and your family.

2. What’s the budget?

The type, quality and length of the renovation will most likely be dictated by your budget and it is very important for this to be addressed during the planning stages. As a rule of thumb, allow a buffer of at least 10 percent to ensure that you won’t be left with an unfinished project at the moment a major blowout happens during the renovation.

3. What are your ‘hero’ items?

‘Hero’ items are those that you won’t compromise and are willing to spend more on. Decide which big-ticket items you want to include in your upgrade and which items don’t need to be top-of-the-line.

4. Will it be a cosmetic or structural renovation?

Are you changing the floor plan, removing walls or extending the current property? If you are, you would need to get planning and building approvals first and contact your local council to ensure that your home renovation plans will adhere to regulations. If you are aiming for a cosmetic renovation, your costs will most likely be much lower and would need to coordinate with fewer people.

5. How hands-on will you be?

Are you going full DIY or are you hiring a design and construction company to handle your renovation? Your answer could impact how much you’re willing to spend on the project and how much time you’re willing to invest to see it through.

A home renovation is a huge undertaking mentally, financially and physically if you’re going to be fully hands-on with the project. We may not be builders so we aren’t of much help on the construction front, but we can help you get the right funding to complete your renovation. Get in touch with us to talk to a professional broker to guide you through.


How much do Australians usually budget for a home renovation?

According to the HIA’s (Housing Industry Association) Renovations Roundup Report, Australians typically spend $50 to $65 per hour for home renovations and half of all renovations in the country are valued between $40,000 and $300,000. Plus according to the Houzz & Home Australia Overview of Home Renovation, the median home renovation project cost was $20,000 in 2019.


What to renovate to increase your property value

To add value to your home, consider structural or design changes such as adding or finishing raw spaces. These foundational changes will last longer than kitchen or bathroom updates or technological improvements like new air conditioning systems (which become obsolete over time). 

If you are looking for smaller projects that you can do to increase the value of your home, you can do these:

  • Minor kitchen remodels like upgrading your kitchen lights
  • A fresh coat of paint
  • Refreshing your curb appeal
  • Replacing old windows
  • Installing a smart home system
  • Installing a water heater

For home renovations, minor or major, we are always ready to help to make financing it as stress-free for you as possible. Call us on 07 3007 9088 for expert mortgage advice.


How do you know if your renovation has gone overboard?

Even if you have a massive budget for a home renovation, it is possible to overdo it. But how do you know if you’re about to pass (or have passed) your limit?

1. You have exceeded your budget

If you are going well above the number that you’ve set, you may need to take a step back and see where you’re overspending. As professional brokers always looking out for your best interests, believe us when we say that going into debt you cannot afford to repay for a home renovation is not the best route to take.

2. Your home is worth a lot more than the other properties on your block

From a resale perspective, sinking too much money into your home may not get you the same number when you’ve decided to sell the property. If the average home in your area is worth $750,000 and yours is assessed at $950,000 after the renovation, future buyers may go after the lower-priced properties nearby instead of yours.

3. Your home updates are not making you happier

Making improvements in your property in areas that you don’t really care about, for example, switching to hardwood floors when you were perfectly happy with the laminate flooring, won’t make you feel more at home in your own home. Focus on which areas will make your home more liveable and enjoyable for you – like finishing your basement or that backsplash that will enhance your entire kitchen.

DIY home renovation guide

If you’re looking to DIY your home renovation, here is a basic guide to help you successfully create the space you want.

1. Get inspired

Take note of what home improvements you’ve always wanted to have and take inspiration from the internet or home interior magazines. List down the styles, layouts, colours, or current trends that you like.

2. Take measurements

Measuring out your space should be easy, just make sure to have a measuring tape (having an extra set of hands would also help) and follow these steps:

  • Draw the outline of your space on a blank piece of paper (preferably A4 size) and include where your windows, doors, appliances, plumbing and power points are located 
  • Measure:

3. Take a good look at your space

Analysing your space also includes asking yourself the following questions to guide how you’ll renovate your home:

  • Which areas do you and your family spend the most time in?
  • Which area has the highest foot traffic?
  • Do some areas count as 2 spaces, for example, does your living area double as an office space?
  • Do you need more space in general or only in specific areas?
  • Are you planning to add new or more appliances? Where do you plan to place them?
  • Do you plan to entertain more often?

4. Start planning your design

Once you’ve answered the questions above, you now are more likely to have a better perspective of how to reorganise your home and which areas will become your ‘hero’ space or need ‘hero’ items. With your current layout at hand, sketch how you want your updated space to look and make adjustments where necessary.

How to finance your home renovation

There are many financing options available depending on your financial situation and the type of renovation you want to finance. These are just three of the options that you might consider:

Option 1: Pay out of pocket or offset or redraw

To avoid further debt, you may choose to draw money from your savings account, sell your investments, or withdraw money from your home loan's offset/redraw facility to fund the project. It may be easier and less risky to use your own money to finance renovations and you are able to enjoy the benefits of your renovations while you worry less about incurring interest payments and paying off any extra debt.

Option 2: Get a personal or construction loan

Personal loans are also available for home improvement projects and can be extended for greater amounts. One option is to choose a secured mortgage where you can put up an asset as collateral in exchange for a lower rate. If you choose to opt for an unsecured loan option, however, you will not need to place any collateral and may be eligible for a higher interest rate.

On the other hand, a construction loan may be an option if you are embarking on large-scale renovations such as an extension, knockdown and rebuild or other major projects.

The construction loan is usually based on the property's estimated final value. This allows you to borrow the amount that you need to pay any renovation-related invoices. These loans may be interest-only and will revert to principal or interest in the future and you could either refinance an existing home loan to a construction loan or add a mortgage to your home. It all depends on the rules of the lender and your needs.

Option 3: Refinance your home loan

Refinancing can help you save money by allowing you to use the equity of your home to finance renovations and improvements. The more equity you have, the better. Borrowers with low LVRs might be able to get a better rate than those looking for 90 to 95% of their property's worth.

One further advantage of refinancing a home renovation is that you are using the equity in your to improve the property, which in turn can increase the value of your home… giving you more equity.

When refinancing it is helpful to understand your borrowing power. If you’d like to learn more, read our breakdown of how to calculate your borrowing capacity.

Get top-rated mortgage assistance from Pivotal Financial when refinancing your home loan to fund your renovation.
Give us a call at 07 3007 9088 to get the right funding for you.


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