Author: Vidhu Bajaj, from HashChing
Recently, News.com.au reported that more than three million homes across Australia had had a makeover with homeowners spending the maximum amount on renovating their kitchens.
Yes, there is a spurt of renovations across the country, as savvy homeowners take advantage of low interest rates to top-up their home loans to fund improvements to their homes. Supporting the trend is Australia’s largest professional body of buyer’s agents, Real Estate Buyers Agents Association of Australia (REBAA), that published a media release saying:
“Home buyers will need to look at renovations and value adding strategies to manufacture equity rather than wait for long-term capital growth as prices soften and flat-line in several key Australian property markets in 2018.”
According to experts, a well-planned renovation can add up to 10% to the value of your home, if you hold onto the property for five or more years.
Indeed, small, well-thought-out changes to your property can boost its value by thousands of dollars. For example, upgrading your kitchen can not only make the house much more comfortable to live in but also increase its value by almost $50,000 or more. On average, a kitchen upgrade would cost you under $20,000, and that’s a good return on investment! Besides, updates to the bathroom, inexpensive new décor, a fresh lick of paint and clean exteriors all add to the value of your property! Constructing a granny flat could also be a good idea. It could be leased out for some extra income and is known to add to the value of your home, according to experts.
Refinancing your home loan to renovate…
According to a recent survey, one in eight people use the equity in their mortgage to fund the renovations to their home. Indeed, according to the Mortgage and Finance Association of Australia, renovating is one of the most popular reasons for refinancing a home loan. And, why not? If you have built some equity in your house, refinancing to a lower rate could benefit you in more ways than one. Apart from reducing your monthly repayments, it provides you with the cash you need to renovate your property without dipping into your savings. And, if your renovations are strategically planned, you’d automatically build up the equity again as the value of the house increases, thanks to the ‘makeover’.
Experts say it is best to contact a professional renovator to get an estimate of your renovation budget before borrowing any money for a home improvement project. It is also a good idea to contact a financial expert to decide whether an equity home loan is a good option for you or not. You can speak to a HashChing mortgage broker to understand your options better, here.
Planning to renovate this year?
There is no doubt that a well-planned renovation can quickly build the equity in your property. However, if you don’t have the cash to finance your reno – there are several options you can look at such as taking a personal loan, using your credit card, redrawing some additional repayments from your home loan or using the equity in your home to expand your borrowing.
While each of these modes have their pros and cons, an equity home loan allows you to borrow a considerably larger amount at a much lower rate compared to a personal loan or your credit card. If you have a renovation on your mind, speak to the experts at HashChing for competitive refinancing deals.
Besides, our experienced mortgage brokers will also help you assess your financial situation to help you choose the best home loan product for your situation. Post your query here or fill out this contact form to have a verified mortgage broker contact you.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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