Australians are spending more money on renovations, which makes sense when you consider just how the pandemic affected how people live and work, plus the impact on the property market. In addition to personal priorities, the government stimulus from COVID-19 made it more palatable than ever before to finance these alterations.
In fact, nationally, data sets show the value of home renovations approved each month has surpassed the $1 billion mark for the first time in february. This then grew to $1.14 billion in March. By comparison, the average monthly value was $680 million in 2019.
There are a few factors at play when it comes to home renovations:
If you’re interested in renovating your home, you should know just how much you have to spend on the repairs and upgrades. With Shore Financial, we can show you all of the different ways available to you if you’re looking to refinance to free up some cash.
One of the more common ways to finance renovations is to use the equity you’ve already built in your home. If you top-up, you’re essentially adding to your current loan, which can both streamline the paperwork and potentially protect you from higher interest rates. You can also consider switching your loan for better terms and conditions. A different lender might offer lower monthly payments and more flexibility when it comes to getting the capital you need.
You can also consider redrawing your loan, which means that you ‘take back’ any additional payments that you’ve already made. Not all lenders offer this, though, and some may charge you fees for this privilege. Whichever option you are interested in, you’re increasing the loan amount and in doing so, the interest payments on the loan (because you now technically owe more).
If you’re doing major work on the home (e.g., new roof, wall demolition, etc.), construction loans may be a worthwhile option. The condition though is that the house has to be worth more after you complete the renovation. You’ll also need to find a registered builder and secure a contract as well as obtaining council approval before you can get the loan.
As you evaluate how to refinance your home, keep the following in mind:
Lenders Mortgage Insurance (LMI) will apply if you’re borrowing more than 80% of your property’s value (total), so make sure you’re factoring in the premium.
If you’re unsure how much equity you’ve built in the property, speak to your Shore Financial broker who can arrange a valuer to come out to see the home free of charge. If the property has been inflated due to market demand, this will be good news for your equity and give you additional buying power.
Finally, keep timing in mind. If you’re going to have a new mortgage application processed, it can take time — and that’s if you have everything in order.
There’s a lot to know and research if you’re hoping to do some home renovations this year. If you’re looking for home loan advice, a home lending specialist can give you all the information you need to keep your expectations in check and prepare for the total costs.
Our team of mortgage brokers doesn’t just know the market, we can tell you how to use the opportunities to your advantage. From your credit score to your current interest rates, we work with what you have and match up your needs with what’s available. If you want to learn how to simplify home renovations, get in touch with Shore Financial today.