7 Tips on Financing Your Home Renovation

Home renovation is taking over Australia. More than 3 million homeowners had an improvement done in their houses, with the kitchen receiving an average of $17,000 because homeowners view this room as an essential room in the house, making it a priority candidate for renovation. However, it’s ideal to spend not more than $33,955 when renovating.

The cost of kitchen renovation varies according to the type of renovation that you want. If you don’t have much money, a budget kitchen can cost from $10,000 to $25,000. Standard kitchens can cost around $20,000 to $45,000. If you have a fairly big budget, you might have to spend $45,000 to $100,000 for a luxury kitchen.

Another essential room in the house is the bathroom which cost around $5,000 to $27,000 for necessary renovation. Standard renovation can include double showers and vanities and cost $25,000 to $35, 000. You have to spend more than $35,000 if you want the luxury bathroom, complete with custom-made cabinets, natural stone countertops, and wall-to-wall windows.

If you want to renovate your house as well, you have to start thinking about your budget. Aside from your daily expenses, you can allot money for materials, labour, and other renovation costs. Here’s a piece of advice on how you can spend money wisely and tips on how you can finance a home improvement project and achieve your dream home.

Consult a Specialist

If you’re not sure what way is best for you, or if you have enough money saved to finance your project, you can consult with finance experts on this matter. Discuss your concerns and your plans for your home. Financial experts can give you an assessment of how much you need to shell out, and if you have to apply for a loan.

It’s essential to be wise financially when it comes to renovations. You might end up with a large loan that you don’t need, and you’re stuck with paying it off for the coming years. So think ahead and be wise in spending your money.

7 Tips on Financing Your Home Renovation

If you have ideas on how you’re going to get the money for renovating, it’s time to explore the options that you have for your project. Choose the most convenient way for you and make sure that you know all the conditions and details that come with your preferred method.

Savings

Some people would instead use their savings than apply for a loan. It can be practical because you don’t have to worry about paying it off for a couple of years, so you’re debt-free.

If you don’t need much cash, savings is the best option for you, mainly if you’re living in Melbourne. It’s the cheapest city to renovate where you can spend $58.91 per hour for constructions and renovations, compared to Sydney’s $64.09 per hour.

If you have the needed cash saved up for a bathroom or kitchen renovation, you’re good to go. Also, you can hire local Melbourne kitchens and bathrooms designers to help you out with the whole process so you won’t have much difficulty renovating your house.

Get help from family and friends

If you don’t want to pay off a loan for several years, but don’t have enough money saved up, you can ask your family or friends to help you out. If your parents have cash saved, you can also borrow from them. If you have friends who can help finance your renovation, you can ask them for help.

Acquire another job

If you’re not comfortable with asking other people for help, you can earn money for yourself. Work two jobs if you can to make extra cash. If you have a large house, you can also rent out your rooms to other people or transient travelers.

Use your home to earn extra until you have enough money to finance your renovation. Be creative in thinking up of ways to save money because if you do, you won’t have to worry about loans in the future.

Home equity loan

Most Australians prefer the home equity loan for their renovation projects. If you’re not familiar with equity, this term refers to the difference between the value of your house (according to the bank) and your unpaid amount in the mortgage. You can’t borrow the full amount, but some banks can let you get a loan of up to 80% of your estimated home value.

What’s good about the home equity loan is that it has lower interest rates compared to personal loans, so you won’t have to spend a long time paying off your bank loan if this is your preferred method.

Bank loan

In 2003, there was a surge in approved bank loans for renovation, reaching a record amount of $639,866. During this time, people would instead loan money rather than use their savings in improving their house. There was a fall in the next years due to people relying more on their own money rather than borrowing money through loans.

As of May 2017, the amount in bank loans for renovations reached $452, 477. This amount means that improvements are still going on in Australia. Hence, choose an investment that will cover all your expenses, plus those unexpected payments that you might have during the process. Unsecured personal loans can range from $5,000 to $30,000, and secured personal loans can reach higher amounts.

Refinancing

If you already have a loan, you can try extending it. If you’re done paying it off, you can apply for a new one, given that you have a good record with the bank or lender. A good reputation can lead the bank to extend your loan or to give you a new one, and this can lead to lower interest rates which are beneficial for you.

Credit card

If you’re buying additional furniture for your home, a credit card can cover the cost. However, be mindful of your loans. Don’t borrow large amounts of money if you don’t have the means of paying it off. Otherwise, you’ll find yourself buried in debt for a long time.

Takeaway

A home renovation will cost you a lot of money. Thus, before you engage in this project, make sure that you have the cash needed to finance everything. You can try saving, borrowing, getting another job, or borrowing from banks or lender. Whatever way you choose, be sure that you can pay off your loan and don’t overspend on your home renovation.

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