Relocate or Renovate?

If you’ve been in your home for a while, life might be different now to how it was when you moved in. Your family may have expanded, maybe you’ve started running a business or thinking of retiring. Whatever it is, your needs aren’t the same as they were. Something has to give, but the question is, do you renovate, or sell up and move somewhere else?

Here are a few things to consider, that might help you make the decision:

Think to the future.

It’s worth sketching out a picture of your future home. Are you planning to have (more or less) kids at home? Do you want more room to work on creative projects or work from home? Are you desperate for a garden or want a smaller house? Write it all down and look at the direction you want your life to take. It’s a pretty simple exercise, but it might give you the answer, just like that.

Gather the right information.

First things first – you need to think about how much a renovation might cost you and how much value it could add to your property.

If you live in an older home be aware of hidden factors like the wiring or the condition of plaster and stumps. It’s easy to start out thinking it’s a simple project only to find it’s a lot bigger (and more costly) than you ever imagined.

So ask the experts – it’s worthwhile having a builder assess the scope to help you make an informed decision and they might have some great ideas too. They’ll also be able to give you an estimate for the bigger jobs like moving walls and retiling.

You might find the renovation wont add enough value to your property or you’ll blow your budget too easily. In that case, moving house might be a smarter option. But if the numbers add up, it might be time to start work.

For large-scale structural renovations, you need to let your lender know as it may affect the security of the loan.

Put a value on the added value.

A renovation could add to the current value of your home, so it becomes an investment as well as an upgrade. One way to find out if it’s likely to improve the value is to ask a real estate agent or property valuer to do an estimation for you.
 
Think ahead to when you might be selling the renovated property. Will your renovation meet the needs of the typical buyer in the area? For example; if there are no schools nearby, but you want to create a family home, will it be easy to find a buyer with a family when you want to sell?
 
Last but not least – make sure you don’t spend more on your renovation than you’ll be able to recoup when you eventually sell it. Having the labour and material quotes you need and a valuation will help with the calculation.

Paying for a renovation.

There are a few different ways you could pay for your renovation.

You may be able to apply to increase your mortgage to pay for the renovations. It’s a very similar process to applying for a home loan, so talking to a Home Loan Specialist could be a good place to start. Your lender will look at your income and expenditure and they’ll revalue the property based on the current market.

If your renovation involves structural changes, you might consider applying for a construction loan. A construction loan means that your property can be valued to include your planned improvements, potentially giving you access to more borrowings. If you’re making non-structural changes, you have the option of either applying for a construction loan or using existing equity.

If you’ve made extra repayments to your home loan over time, you will have built up a surplus balance.  Well done! If your loan type allows, you could redraw the surplus funds to help pay for the renovations. Keep in mind that for structural renovations, you need to let your lender know what you’re planning to do no matter how you plan to pay for it.

Buying a new house.

In the end, you might decide to move somewhere new rather than renovate your current house. There are some financial aspects you’ll have to consider when you do.
 
You can consider using the equity in your current home to buy your new house. If the equity in your current property doesn’t cover the required deposit for your new place, you will likely need to save for the deposit too.

A Home Loan Specialist can provide you with property and suburb reports to help you find your new home.

Moving costs money.

Unfortunately, moving costs money. You’ll have to allow for the cost of the new house plus expenses like an agent's commission, legal fees and stamp duty, loan fees and removalist fees. Remember to keep this in mind when budgeting your move.

The more you know…

Making the right decision is pretty tough if you don’t have all the info. Make sure you get detailed costing information, and referrals or references from trusted sources for any builders or other professionals you might use for a renovation.

Ask your Home Loan Specialist for information too. They’ll be able to give you your options when it comes to using your home loan or equity to renovate  or sell up and buy somewhere new. 

There are a lot of factors to consider, so it’s worth taking your time. It’s not just about the financial side of things, but about what fits your unique situation. So as well as doing the research and maths, make a pros and cons list based on the financial and lifestyle implications of each option. Then you’ll be able to plan your next steps, fully armed with the knowledge you need.

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Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48123123124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.