Renovator’s dream a lot of hard work

AUSTRALIANS love renovating, with a study revealing 56 per cent have completed works on their home or investment property since buying and another 20 per cent plan to do so in the next year. But experts warn any added value can be lost by making the wrong finance choices. Mortgage Choice’s Evolving Australian Dream 2018 white paper revealed 62 per cent of renos were to add value, or to improve a home because it was too expensive to upgrade to a new one. Mortgage Choice CEO Susan Mitchell said buyers were deterred by “the high barriers to entry in Australia’s largest capitals”. Despite cost being a driver, 36 per cent of renovators exceeded their budgets. RateCity money editor Sally Tindall suggested several ways to finance a renovation, but paying down debt as soon as possible should be prioritised in each. The first was using your existing mortgage. “Most loans will let you redraw (or) you can ask your bank for a topup,” she said. “Lenders are typically happy for customers to refinance their loan up to 80 per cent of the property’s value.” A low interest rate was a plus, but downsides included limited funds and high compounding interest if you let extra costs roll over for decades. Construction loans were another option. Borrowers can draw down the money as work progresses, only paying interest as funds are used. But extra paperwork is usually required.

Those with good credit history could also consider personal loans.

“Personal loans have higher rates than home loans, but shorter terms, so interest isn’t compounding for decades,” Ms Tindall said.

Those tempted to use a credit card should beware.

“If you’re just looking for a small amount of cash … a credit card that offers a 0 per cent introductory period for new purchases could work,” she said. “But pay it off in full before any interest charges kick in.”

Rachael Taylor and Jake Burn recently bought and renovated a four-bedroom Gold Coast house.

“I’m a carpenter and Rachael is a painter, so we thought we’d buy something to do up,” Mr Burn said.

After material costs, the couple expects to make their money back in value, with extra equity on top, but Mr Burn said non-qualified types were better off paying professionals.

“The guy who had it before us was a DIY type. He’d probably watched a couple of episodes of The Block,” he said. “He installed doors, windows and had a crack at the bathroom tiles, which were pretty bad. It definitely helped us get a price reduction.”

Mr Burn has worked on numerous renovation jobs and advised anyone considering a project to allow more time and money than first estimated and to commit to one job at a time.

“We’ve been to friends’ places where they start in one space, then try something different and a couple of weeks later, they’ve got an unliveable house,” he said.

“You need to pick a job and finish it before moving on.”