Renovating – What to consider before renovating
The decision to renovate is a common sticking point for homeowners, who can spend hours weighing up the cost benefits. Whether your motivation is to add value to your property or to add a touch of your personality to the home, renovations are expensive and debt often follows.
By working with Angela as your mortgage broker you will be able to find solutions that benefit your long-term goal, rather than hindering future plans. Many homeowners have concerns over whether they would be able to afford the repayments, and whether the proposed renovation would add value to the property.
While your mortgage broker can’t assist you with forecasts on future property values, she can help you reassess your current financial position, run through your plans and future payments, and decide if you can afford to take on more debt.
Laying the foundations
With a mortgage broker in your corner, the next step is to investigate how much you need to borrow. Work out the specifics of your renovation, what the average cost to renovate is in your area and how much you are eligible to borrow.
If renovations are likely to take over your living quarters you may need to also consider the additional cost of accommodation for the renovation period. This is another cost to factor into your budget.
Get bang for your buck
Once you decide to renovate, if you are trying to add value to a house to resell, it is important to look at the rooms and areas that will add the most value. These are average renovation prices, however prices will fluctuate based on the city and suburb.
If you are a fan of the show The Block, you will know kitchens sell houses. According to realestate.com.au, the average renovation cost you should be spending on a kitchen is between $12,000 and $16,000.
The average bathroom space in Australia is six square metres. Look to spend around $9,000 – $12,000 as the bathroom is a highly trafficked space and needs to appeal to a wide variety of investors.
- Other areas
An extra bedroom or a deck outside both add appeal and improve the standard of living for the homeowners.
The final hurdle to look at is the council fee. The council can charge you up to $2,000 for an application fee, although prices can vary. After speaking to your mortgage broker and finalising the renovation, make sure you account for an extra 10 per cent in your funds, to cover any unexpected costs.
Deciding on the type of loan
If after the assessment and investigation you decide to renovate, there are a couple of different ways to finance the costs such as a Full Refinance of your existing Home Loan which includes the cost of the renovations or increasing your existing Home Loan.
A construction Loan may also be required depending on the size of the renovation, as the Loan may need to be based on the ‘future value’ of your home after the renovation is complete. In this case a fixed price builders contract may be required or quotes that outline the cost of the various work you are undertaking.
Contact me to find out more
In a 2015 Finder.com.au survey, 42 per cent of homeowners said they were worried that, by unlocking home equity, they would not be able to afford the larger repayments on their mortgage. However, every household and property is different, as are the funds needed to achieve a renovation.
Together we can do the following:-
- Work out how much equity you have: this is done via a valuation so that we know what the maximum Loan amount can be. This can be based on the ‘current’ Value of your property or it can also be based on the ‘On Completion’ value of the home, that is the value after the renovations are completed.
- Work out how much you can afford to borrow: this is what Angela can calculate for you and she will ensure that you have all of the relevant financial information you need to make a decision on your renovations.
To make sure you get a great outcome from your local Mortgage Broker who knows how to take the worry out of your loan requirements for your renovation.
Give me a call on…
0408 761 847
In the meantime have a look at the Home Loan calculator to provide you with a guide on repayments.
Look forward to your call.