Home renovations boomed in Australia after the pandemic. In 2021, Australians spent more on renovating their homes than ever before – $12.3 billion to be precise.

More recently, rising interest rates, increasing prices, supply chain issues and labour shortages have put some people’s home renovation plans on ice.

So, is now a good time to renovate? Well, it all depends on your circumstances and goals. For example, if the alternative to renovating is relocating and copping the associated stamp duty and other expenses, renovating may be the better option – delays and all.

 

Tips for renovating in 2023

• Be prepared to compromise. You may need to adjust your budget and expectations around when you can complete your renovation. But with patience, you’ll get there.
• Build in a buffer. With interest rates still on the move, it’s important to make sure you have a financial buffer in place. We’ll do the sums for you and make sure you are comfortable with how much you are borrowing for your renovation.
• See the big picture. Remember, you don’t have to do it all at once. A lot of people start with one area of their home then slowly work towards their dream renovation.

 

Example renovation costs in 2023

Here’s what you can expect to pay for different areas of the house in 2023 according to hipages:

• $100,000 to $300,000 for large home renovation projects
• $25,000 to $50,000 for kitchen renovations
• $15,000 to $30,000 for bathroom renovations
• $35,000 to $100,000 for bedroom extensions

 

How to fund your renos

Refinance

If you’ve paid down your home loan somewhat or your home has appreciated in value, you may be able to refinance and use your equity to borrow the funds needed for your renovation.

Equity is the bank’s valuation of your property, minus what you owe them.

You may be able to top up your existing loan or find another lender, potentially with a more competitive interest rate.

Another option is to refinance to a line of credit loan, which gives you access to funds as you need them. Interest is charged on the balance owing, not the total loan amount, giving you flexibility to complete your renovations at your own pace.

Construction loan

Depending on the size of your renovation, you may consider a construction loan. With this option, you receive your loan in increments and can pay for your reno as key stages of the project are completed.

One of the benefits of construction loans is that you don’t pay interest on your renovation costs until the work has actually been done. These loans are also usually interest-only for a period of time, before reverting to principal and interest down the track.

You can take out a construction loan as a second mortgage, or potentially refinance your current mortgage to be a construction loan.

Personal loans

 For smaller reno projects, you may consider a personal loan. These types of loans may be secured (against something you own, such as term deposits, vehicles or real estate) or unsecured (meaning there’s no need to provide collateral).

Keep in mind that the interest rates associated with personal loans may be higher than home loan interest rates.

Other options

 If you have money in an offset account or have a redraw facility where you’ve made additional repayments on your mortgage, you may be able to use those funds for your renovation.

Be sure to consider the impact of any withdrawals on your interest and repayments.

 

We’re here to help

Need a little inspiration for your renovation? Check out these 2023 design trends.

And if you want to chat all things finance, we’re here to help. No matter how big or small your renovation dream, we’ll find the right finance to get your project off the ground.

Get in touch today.