According to new research, some homeowners are not renovating their properties as they find it difficult to refinance their home loan to fund the project.
A survey of more than 1,000 homeowners, completed by finder.com.au, found that 90 per cent have never refinanced their home to renovate and out of those who haven't refinanced to renovate, only 17 per cent would consider doing so.
The survey also found that 73 per cent of home owners thought it would be difficult to refinance their home loan in order to fund the renovation, with 14 per cent finding it overwhelming.
The value of home loans financed for alternations and additions have almost halved since 2003 and Michelle Hutchison, Money Expert at finder.com.au, is not surprised.
“Many borrowers are dodging the idea of refinancing their home to renovate because they just don’t know where to start,' she said.
"The problem with refinancing to renovate is that every household is different. Everyone has different financial situations, mortgage sizes, equity and work needing or wanting to be completed. The amount of money people want to spend can also vary significantly."
However, refinancing your home loan to fund a renovation does not have to be daunting if you take the time to do the research beforehand. Homeowners need to work out whether they have enough financial stability to take on larger mortgage repayments and whether the renovations will actually pay off in the long run. Here are just a few tips to help give you the best possible outcome.
• Set a budget: Before you refinance, calculate what you want to spend on your renovation and whether you can realistically repay that amount. A good rule of thumb for renovating is not to spend more than 10% of the median property value.
• Research property values in the area: One of the mistakes renovators make is they do not research the area around them to see what other properties are selling for. For example, if the average selling price for a similar property in your area is $500,000, but you want to try and renovate and boost your value to $600,000, you may find it difficult to sell your property as buyers may not be willing to pay that much for a property in that area.
• Speak to a lender: This is the best person to speak to about your options. They can chat to you about what your property is currently worth, what type of renovations you are looking to undertake and home loan options that may be suitable. Give our Lending Specialists a call on 13 72 62 for a chat about funding your renovations.