Key takeaways:
Start with what needs to change. Renovating can address space or layout, but not location, land size or property type.
Check whether renovating is feasible. Your site, structure, approvals and property restrictions can limit what's possible.
Compare the total costs. Factor in all renovation costs or the full costs of selling, buying and moving.
Equity isn't the same as borrowing capacity. Additional borrowing depends on your finances and lender criteria.
Allow for changes and delays. Consider unexpected costs, timing, interest rates, income changes and holding costs.
If your home no longer meets your needs, you may be weighing two options: renovating your current property or moving to one that suits you better. The right choice depends on what needs to change, what your property can accommodate, the total cost of each option and your longer-term plans. Your financial position can also affect what's practical.
Renovations may affect your property's value, but spending more doesn't necessarily result in an equivalent increase. The outcome can depend on the property, the work undertaken, the cost and local market conditions. This guide covers the key property, practical and financial considerations to help you decide whether renovating or moving may better suit your circumstances.
Renovate or move: Which option is right for you?
Start with the problem you're trying to solve. Renovating may address issues such as space or layout, but it can't change your location, land size or access to schools, transport and services. Consider:
Space and layout: Could an extra bedroom, bathroom, home office or reconfigured floorplan meet your needs?
Location: Does your current suburb still work for your household, including schooling, commuting, transport and access to services?
Property constraints: Can your property accommodate the changes you need?
Longer-term needs: Will the home continue to work as your household or circumstances change?
What renovation can't solve: Would moving give you something your current property can't, such as a different location, more land or another property type?
Renovating vs moving: What should you consider?
When is renovating worth considering? | When is moving worth considering? |
|---|---|
When you want to stay in your current location | When your location no longer meets your needs |
When your property may be suitable for extension or reconfiguration | When the land, structure or layout limits your renovation options |
When renovating could address the main issues with your home | When you need a fundamentally different property |
When the project may be manageable within your circumstances | When the renovation required may be too extensive or costly for your circumstances |
When the renovated home may meet your longer-term needs | When you may still outgrow the property after renovating |
These aren't hard-and-fast rules. Your options will depend on your property, priorities and financial circumstances. If neither option suits your circumstances right now, you can take more time to reassess before committing.
Can your home accommodate the renovation?
Before committing to a renovation, check whether your property can accommodate the work. Available space is only one factor; the site's characteristics, existing structure and property-specific restrictions can all affect what's feasible. Consider:
Site and structure: Is there enough space to extend, and can the existing structure accommodate the changes?
Planning and building requirements: Check whether your project needs planning permission, building approval or other permits.
Heritage, strata and other restrictions: These may affect what you can alter, extend or demolish.
Easements and site restrictions: Boundaries, easements and other restrictions may affect where or how you can build.
Construction logistics: Consider builder availability and whether the project can be completed within a timeframe that works for you.
Living arrangements: Decide whether you can remain safely in the property or need temporary accommodation.
Requirements vary by property, project and location. Check what's required with the relevant authorities and appropriately qualified building, planning or engineering professionals.
How does the cost of renovating compare with moving?
A renovation quote and another property's purchase price don't show the full cost of either option. Compare the total cost of getting the home you need, including transaction, financing and other associated costs.
Renovating vs moving: Costs to consider
Renovating | Moving |
|---|---|
Design and professional fees | Purchase price |
Builder, trade and material costs | Stamp duty and other government charges, where applicable |
Planning and building approvals, where required | |
Project management, where applicable | Selling and marketing costs |
Temporary accommodation and storage | |
Financing costs | Financing costs |
Project variations | |
Contingency for unexpected costs | Repairs or upgrades to the new property |
Temporary accommodation, where required | |
Other applicable transaction costs |
The costs that apply will depend on your project, property, location and circumstances. Get detailed renovation quotes and compare them with suitable properties, including the costs of selling, buying and moving.
Also consider how long each option is likely to meet your needs. A renovation may solve your current space or layout issues, but if you're likely to outgrow the property again, that may affect the decision.
You might also be interested in: The hidden costs of buying a bigger home in Australia
How can equity affect your renovation or upgrade plans?
Your home equity may be relevant whether you're renovating or moving, but having equity doesn't mean you can automatically borrow the full amount. Home equity is broadly the difference between your property's value and the amount you owe on your home loan.
Becky Madden, Mortgage Broker at Aussie Erina, says exploring available equity has been a recurring theme among homeowners considering renovations and other property plans.
"There's definitely been a persistent theme in exploring cash-out of equity to fund a variety of plans," she said.
"For home owners who have held their properties for a number of years, I've seen good equity growth enabling home owners to cash-out."
How much additional borrowing may be available can depend on:
Property value and mortgage balance: These affect your equity and may be assessed through a lender valuation.
Loan-to-value ratio: Lenders assess the loan amount relative to the property's value using the loan-to-value ratio (LVR), with acceptable LVRs varying by lender, loan and circumstances.
Lenders' mortgage insurance: LMI may apply at higher LVRs, depending on the lender, loan and your circumstances.
Your financial position: Income, expenses and existing debts can affect your ability to service additional borrowing.
Lender criteria: Serviceability requirements, valuation policies and other lending criteria vary between lenders and products.
Put simply, equity is part of your financial position; it isn't automatically money available to spend.
How could equity affect renovating or moving?
If you're renovating | If you're moving |
|---|---|
Additional borrowing may help fund eligible renovation costs, subject to lender assessment and approval. | Equity may contribute towards the deposit or other costs of buying your next home, subject to your financial position and lender criteria. |
Want to understand your renovation options? Read our guide to using equity to renovate your current home.
Which home improvements could you consider?
If you decide to renovate, focus on changes that address the problems you've identified and suit your longer-term needs. Depending on your property, these could include:
Kitchens and bathrooms: Improve layout, storage, functionality or finishes.
Street appeal: Consider maintenance, landscaping and exterior improvements.
Energy efficiency: Options may include insulation, double glazing and energy-efficient appliances.
Energy and EV upgrades: Depending on the property and household, solar, batteries and EV charging may be worth considering.
The effect on property value isn't guaranteed. It can depend on the property, the quality and cost of the work, buyer demand and local market conditions.
How can you avoid overcapitalising?
Spending more on a renovation doesn't necessarily increase property value by the same amount. Research comparable properties in your area and consider seeking independent property advice before relying on an assumed increase in value. If you're planning to stay, also weigh the practical benefits of the renovation against its potential effect on resale value.
For more information, read our guide to renovations that add the most value to your home.
If you're moving, how should you find your next home?
If renovating won't solve the problem, define what your next home needs to offer before you start searching. Focus on your household's priorities rather than simply looking for a bigger property.
Separate must-haves from nice-to-haves
Setting priorities before inspecting properties can help you compare options more consistently.
Must-haves | Nice-to-haves |
|---|---|
Suitable location or school zone | Extra living areas |
Enough bedrooms and living space | Larger backyard |
Access to required transport and amenities | Additional storage |
Suitable property type | Preferred finishes or features |
Consider whether nearby suburbs could offer a better combination of property type, space, transport and amenities. Use the Aussie Property search tool to research suburbs, explore properties and compare market information as you narrow your search.
Should you buy before selling your current home?
When upgrading, you'll need to decide whether to buy your next home before selling your current one, or sell first. Buying first may give you more time to find the right property, while selling first may give you greater certainty about your available sale proceeds once the sale has completed.
For homeowners planning to move rather than renovate, Madden says available equity may also form part of the funding strategy for the next purchase.
"Alternatively, if they're looking to purchase their next home, these funds would then form the deposit and purchase costs for the new purchase," she said.
Buy first or sell first?
Buy first | Sell first |
|---|---|
More time to find your next home: You can search without waiting for your current property to sell. | Greater certainty about sale proceeds: You'll have a clearer picture of the funds available for your next purchase after selling costs and other commitments. |
May simplify the move: You may be able to move directly into your next property without a gap between homes. | May reduce the time you hold two properties: Selling first can limit the period you're responsible for both homes. |
May require additional finance: Bridging or other finance may be needed to cover the period between buying and selling. | May create tighter timing: You may need to coordinate your next purchase with your sale and settlement dates. |
Buying first may mean holding two properties temporarily and could require bridging or other finance. Selling first can reduce that overlap but may leave you with less time to secure your next home. Bridging finance and other lending options are subject to lender criteria, assessment and approval and other lending options are subject to lender criteria, assessment and approval.
Aussie can also help you create a shortlist of real estate agents suited to your property type, if you decide the best path for your circumstances is to sell your current home and find one more suited to your current needs. You can learn more about our Seller Assist service here.
Before you start house hunting, conditional pre-approval could give you a better indication of how much a lender may be prepared to lend based on the information assessed, which can help you set a property price range.
How can you finance a renovation?
The finance option you use can depend on the renovation, your existing home loan and your financial circumstances. Common renovation finance options include:
Option | How it may work |
|---|---|
Home loan top-up | Increases your existing home loan to provide additional funds, subject to lender criteria, assessment and approval. |
Could let you access eligible additional repayments previously made on your home loan, subject to the loan's redraw terms and available balance. | |
Can fund eligible building or structural work, with funds generally released progressively as agreed construction stages are completed. | |
You could use funds held in an offset account for renovation costs. If the balance falls, less money will be offset against your home loan when interest is calculated. |
Madden points out that having enough equity for a renovation doesn't necessarily mean a homeowner will be approved to access all of it.
"Lenders will only lend an amount that the borrower can afford to repay," she said.
Even where a property has sufficient equity, the amount available to borrow may be lower once the lender assesses income, expenses, existing debts and repayment capacity.
Madden also notes that the purpose of the funds can affect which finance options are available.
"Lenders will also want to understand the purpose of the funds and there are rules around renovations.”
For larger or structural renovations, a construction loan may be more appropriate than a standard cash-out or top-up, depending on the scope of work and lender requirements. Construction loans generally release funds progressively as agreed stages of the project are completed.
The options available will depend on your renovation scope, existing loan, financial circumstances and lender requirements. Features, eligibility and conditions vary between lenders and products.
For more information, read our guides to how to finance your home renovation and using equity to renovate your home.
Fixed, variable or split?
If you're taking out or restructuring a home loan to fund your renovation, consider how the interest rate is structured.
Provides greater certainty about the interest rate on the fixed portion during the fixed period, although restrictions and break costs may apply. | The interest rate can rise or fall, which means repayments may also change. | Divides the loan between fixed and variable portions, combining features of both structures. |
For renovations that take several months, consider how potential rate changes could affect your repayments and overall budget. Comparing different repayment scenarios can help you understand the impact if rates move during or after the project.
You might also be interested in: Expiring fixed rate? How to prepare for potentially higher mortgage repayments
How do staged drawdowns work?
For eligible construction projects, a construction loan may release funds through staged drawdowns rather than providing the full approved amount upfront. Typically:
Funds are released as agreed construction stages are completed;
Interest is generally charged on the amount drawn rather than the full approved loan amount during the drawdown period, depending on your loan structure; and
Lenders may require contracts, plans, approvals, invoices, progress inspections or other documentation before releasing funds.
Drawdown stages and requirements vary by lender and project, so check what's required before construction begins.
What should you consider before committing?
Before deciding, consider how changes to your costs, timing or financial circumstances could affect your plans.
Budget: Could unexpected costs or project variations increase your total spend?
Timing: Could construction, a property sale or settlement take longer than expected?
Interest rates: Could rate movements affect your repayments or budget?
Income: Could parental leave, reduced hours or another income change affect your financial position or lender assessment?
Holding costs: Could you need temporary accommodation or need to cover costs associated with two properties?
Borrowing: Would any additional repayments remain manageable alongside your existing commitments?
If you're renovating, consider including a contingency for unexpected costs. The right amount depends on the project.
Renovate or move: Making your decision
Whether you're renovating or moving, start by defining what you need from your property now and long-term. That can help you determine whether your current home can realistically meet those needs or whether another property may be a better fit.
Before committing, compare the feasibility and total cost of each option alongside your financial position. If borrowing is part of your plans, consider how your equity, borrowing capacity, repayments and potential changes to your circumstances could affect what's achievable.
An Aussie Broker can help you understand how your borrowing position and home loan options may fit into your renovation or next-home plans.
