If there’s anything that hit TV shows like The Block or House Rules tell us, it’s that Aussies really love their home renovations.
Last year, over 3 million of our nation’s home owners underwent some kind of renovation to their properties.
And, really, who doesn’t love transforming a room from drab to fab? You don’t need to be a house-proud perfectionist to enjoy the feeling of a fresh new space.
But while the prospect of renovating your home can be exciting, the price tag that comes along with the project rarely is.
Lost for ideas on how to finance your dream home plans? Thinking about a home loan with money for renovations?
Here are five of the most popular ways Aussies are funding their renovations:
1. Refinance your home loan
Perhaps the most popular option in this list, as a recent survey found that 1 in 8 people used the equity in their mortgage to fund renovations.
If you have a good degree of equity in the house, refinancing to a lower rate could work out well for you. In fact, refinancing your home loan for renovations can solve a few problems.
Refinancing to a lower rate can mean reducing your monthly repayments, though if you take out a higher loan amount than those costs may be balanced out. However, you’ll also free up cash for renovations and work towards building your equity back up again.
It’s an intelligent decision to make for those who have a long-term vision. You’re essentially increasing the value of your home without poking a hole in your savings.
But if the cost of your renovations turns out to be greater than the amount of equity you have available, then this option may not work out the way you hoped.
2. Take out a line of credit loan
Better for ongoing or longer term renovations, a revolving line of credit can be a flexible way of funding your dream home goals. You can access the credit whenever you want (up to your approved limit) and only pay interest on the funds you use.
The way it works is that after paying off your balance, you can borrow the funds again without needing to re-apply for credit.
While this option can appear attractive, it’s not suitable for those who tend to have trouble servicing their lines of credit, like credit cards or personal loans.
3. Personal loan
Proceed with caution on this one. A personal loan is normally an expensive commitment that requires foresight and consideration. On top of that, the interest charged on the loan can quickly become overwhelming if you don’t sit down and create a firm payback plan.
However, if the final cost of your renovations is below $30,000—the limit for most personal loans—this option could be for you.
If you don’t have enough savings to embark on a project, chat to your bank about the type of personal loans they offer.
Keep in mind that interest rates on personal loans are generally higher than on home equity loans. If this is cause for concern, you may want to instead look at refinancing your home loan or tapping into your home equity.
A financial advisor can help you figure out which options are cost-effective for your financial situation.
Don’t worry, we’re not suggesting you set up an online fundraiser asking for cash! With all of the worthy causes posted online, it might look a bit odd to ask perfect strangers online to help fund your pricey kitchen revamp.
But that doesn’t mean you can’t ask friends and family to help out. For example, if you’re engaged to be married, you could put renovation costs on the registry instead of traditional wedding gift requests.
Asking for a financial gift or a loan from loved ones can be a touchy subject, so tread carefully. This option is more suited to newlyweds who need a hand, and for smaller, more essential renovations than glitzy, over-the-top revamps.
5. Earn extra income
Finally, using your own hard-earned cash can be the most rewarding and sensible way to fund your next home renovation!
If your current household income just isn’t up to the job, why not think about ways to earn extra income? Sit down and figure out your budget, and then draft out a rough timeline of how long it would take you to earn that amount on your current income.
Now look at all the ways you or your partner could earn extra income to supplement that savings goal. Could you pick up a casual weekend job? Or possibly sell some items you no longer use on eBay or Gumtree?
In the new digital age, there’s also an abundance of work-from-home opportunities online. Setting up a way to earn some easy or passive income could get you that much closer to funding your renovation goals and enjoying the home you’ve always wanted.