Get your finances in order before renovating
With everyone stuck at home, you won’t be surprised to learn there’s been a surge in renovations activity.
Renovations can be a great way to add liveability and value to your home – but they can also be costly.
Last year’s annual Houzz & Home Australia survey of more than 8,800 respondents found kitchens are the most popular rooms to renovate, followed by living rooms, bedrooms, bathrooms and laundries.
However, half of homeowners in the Houzz survey were renovating three rooms per project, at an overall median spend of $20,000.
So if you’re looking at doing a larger scale renovation during the quarantine, and need help paying for it, these are the three common ways people pay for their renovations:
- Taking out a personal loan
- Adding the costs to their existing home loan
- Taking out a new home loan
Another way to fund the renovation is to pull out equity from your current home.
For example, if you had a $500,000 mortgage on an $800,000 property, you’d have $300,000 of equity. A lender might allow you to use some of that hypothetical $300,000 to fund your renovations.
Be aware that you need more than 20% equity in your property to make this work. If your loan-to-value ratio (LVR) climbs above 80%, you might have to pay lender’s mortgage insurance (LMI).
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