Home renovations have become increasingly popular in recent years as people seek to improve their lifestyle or increase the value and appeal of their home investment.

 

Information from the Australian Bureau of Statistics points to home extensions as being the most costly renovations, while the cheapest include the addition of security doors and screens.

 

When it comes to financing renovations, there are a wide range of options available. These include saving up the money, redrawing money from your home loan or extending your existing loan.

 

If you don’t already have the money saved and ready to use then using your home loan to finance the renovation is a good option. While you will be required to fill out some more paper work, your home loan interest rate is, more often than not, the cheapest type of credit available.

 

Any extension on your Resi mortgage must be over $20,000 and as part of obtaining an extension on your existing mortgage a new valuation may be required on the property. Particularly if the previous valuation is more than 3 years old, a new valuation will be done to determine the latest market value – which may help you decide exactly how much you can and want to spend on the renovation. 

 

The Real Estate Institute also warns that there can be dangers in renovating, particularly if you are ‘overcapitalising’ on your home – spending more money on your renovations than you would recoup if selling. 

 

So if you are going to extend your mortgage to pay for your renovation make sure you do the sums first and find the right balance between adding value and improving your lifestyle.

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