Before you start planning your renovation in detail you should seriously consider if:
- Your current home can be structurally and legally renovated to meet your needs.
- You'll avoid overcapitalising.
- You can get the finance you need to do the job.
Check you can make the changes you want
Cost is not the only factor that can get between you and your dream home. There might be a couple of hurdles you have to jump over before you start planning.
You should check:
- Can the existing structure of your home support the additions you'd like?
A building inspection can help you answer that – it might also uncover potential problems such as dry rot or white ants which could make moving more viable when compared with the costs of fixing these problems.
- Will your local council approve your plans?
Local planning laws may limit what you can do with your property.
- Will your strata or body corporate approve your plans?
If you live in an apartment block, you need to consider what your neighbours will allow.
When you first start planning the changes you'd like, try to estimate what your home will be worth when you finish renovating. If the cost of the renovation is more than the market value it'll add to your home, you'll be overcapitalising.
To avoid overcapitalising, the experts reckon that you should spend no more than 30% of the value of your home on renovations. But to be sure, get your home valued, then checkout what similar but renovated places nearby are selling for. The difference between the valuation and the average price of the other renovated homes is the amount you should look at spending.
Also chat to agents in your area to see what kind of renovations are popular and tend to add the most value. Then draw up a budget including building material costs, architects fees, insurance and labour. Remember the best way to avoid budget blowouts is to know exactly what you want and clearly explain that to your builder when you are getting a quote.
If your home has increased in value since you bought it and you've built up some equity in it, you can use that equity as security to finance your home renovation.
There are 2 main ways you can tap into this equity:
- Get a line of credit – this type of loan allows you draw on cash, up to an approved amount, only when you need it. With a line of credit loan you only pay interest in the funds you've drawn.
- Refinance your current loan – talk to your existing lender about increasing your loan or shop around to see if you can get a better home loan deal somewhere else.
Continue to information about choosing the right real estate agent.