Thinking of tackling a DIY home renovation? Refinancing can still be a good option to pay for your project when you’re doing it yourself.
What does refinancing mean?
Refinancing simply means paying out your current loan by taking out a new one with your current lender or a different one. Some of the reasons people refinance are for better rates or features, to consolidate debt and to buy or build a new home. You can also refinance to fund a home renovation.
Many people are inspired by shows like The Block, House Rules and Reno Rumbles and dive into home renovation projects, but there are advantages and disadvantages to the DIY approach.
While it may seem you’ll save a bucket load of money with DIY home renovations, small mistakes can become large ones, and at the end of the day, may cost you more than hiring an expert from the start. If you’re a tradie yourself, there are still things you may not be able to tackle on your own, and trying could cost you thousands. And by working on your own home, you’re potentially losing income from other projects and builds.
The DIY approach definitely works better for some projects. Painting is a great example, as it can take time for preparation as well as painting. Doing it yourself means you’re saving on paying out for many hours of work.
Choosing to renovate your kitchen using a flat-pack – an increasingly popular choice – is another popular DIY option. Just remember to get a professional to do the skilled labour, like waterproofing, electricity and plumbing. Doing simple tiling jobs yourself, pitching in with some landscaping or putting up fencing are also great ways to save some cash.
The refinancing process
When looking to refinance, you need to go to your lender with the right documents, including a renovation budget. Be realistic and don’t leave anything out. Remember, your lender is trying to help you fund a successful renovation, so you need to be as honest as you can about all your costs.
Figure out what tasks you’ll need to outsource to the professionals, and also factor in contingency plans for unexpected occurrences. When it comes to doing things yourself, include how much materials will cost and whether you’ll need to hire any equipment.
When it comes to the actual application, you’ll need to include things such as verification of your income, previous mortgage statements, bank statements and any other statements you wish to include in the refinance amount, plus your identification and council rates notice. A mortgage broker can explain everything you need in detail!
If you’re planning to do the whole thing yourself, you may want to consider an Owner Builder Loan, available from a few select lenders. But the conditions can be quite stringent so it’s very important to do your research or get expert help.
There are also a whole bunch of permits and conditions that need to be met when starting building work, and this process begins when plans are being drawn up. These tend to differ from state to state and even between councils so talk to your local council about exactly what you’ll need.
The most important detail, when it comes to refinancing and renovating is to research, plan and be realistic about what you can and can’t do. When in doubt, speak to an expert.
Did you refinance to fund a DIY renovation? Share your tips in the comments below.