We take a look at some of the financial aspects of both options.
If you live in an older home, be aware of hidden factors like the wiring or the condition of plaster and stumps. It’s easy to start out thinking it’s a simple project only to find it’s a lot bigger (and more costly) than you ever imagined.
So, ask the experts. It’s worth having a builder assess the scope to help you make an informed decision – they might have some great ideas too. They’ll also be able to give you an estimate for the bigger jobs like moving walls and retiling.
A renovation could add to the current value of your home, so it becomes an investment as well as an upgrade. One way to find out if it’s likely to improve the value is to ask a real estate agent or property valuer to do an estimation for you.
Think ahead to when you might be selling the renovated property. Will your renovation meet the needs of the typical buyer in the area? For example, if there are no schools nearby but you want to create a family home, will it be easy to find a buyer with a family when you want to sell?
Make sure you don’t spend more on your renovation than you’ll be able to recoup when you eventually sell it. Having the quotes you need, plus a valuation will help with the calculation.
There are a few different ways you could pay for your renovation.
You may be able to apply to increase your mortgage. It’s a very similar process to applying for a home loan, so contacting your lender could be a good place to start. Your lender will look at your income and expenses, and they’ll revalue the property based on the current market.
If your renovation involves structural changes, you might consider applying for a construction loan. A construction loan means that your property can be valued to include your planned improvements, potentially giving you access to more borrowings.
If you’re making non-structural changes, you have the option of either applying for a construction loan or using existing equity. Keep in mind that for structural renovations, you need to let your lender know what you’re planning no matter how you’re paying for it.
If you’ve made extra repayments to your home loan over time, you’ll have built up a surplus balance. If your loan type allows, you could redraw the surplus funds to help pay for the renovations.
In the end, you might decide to move somewhere new rather than renovate your current house. There are some financial aspects you’ll have to consider when you do.
You can consider using the equity in your current home to buy your new house. If the equity in your current property doesn’t cover the required deposit for your new place, you will likely need to save for the deposit too.
You’ll also have to allow for the cost of the new house plus expenses like an agent’s commission, legal fees and stamp duty, loan fees and removalist fees.
When deciding, make sure to get detailed costing information, as well as referrals or references from trusted sources for any builders or other renovating professionals.
If you’re thinking about building, check out what you should consider first.
Author: Bankwest (sponsored content)