To stay or not to stay. That is the question many homeowners encounter as their lives change and families expand. Is it wiser to stay and renovate? Or better to relocate and start afresh? It’s never an easy choice to make, but a recent survey undertaken by Houzz reveals the case for renovation nationwide is strong.
It showed we are increasing our spend on revamping our current homes each year, with the average spend in 2016 $66,900, up 4% from the year before – and the results for 2017 are shaping up to be much the same.
This was the situation Sydneysiders Sheree and John found themselves in recently. Having bought a quaint Sutherland Shire cottage in 2007, it was ideally matched to their current needs and the perfect ‘stepping stone’ until they purchased a forever home. As the years passed, however, they realised they loved the location, it was close to public transport and they had established a fantastic support network of friends close by. What to do then, when this family of four were suddenly bursting at the seams of their cosy abode?
Why stay?
- Dodge stamp duty: Let’s be honest, no one likes paying taxes, and when you opt to renovate, this is a sure-fire way of saving thousands. While this duty varies from state to state, in NSW, for properties valued over the $1 million mark (which is almost the majority in Sydney these days) you’re looking at an outlay of $40,490 plus $5.50 for every $100. Staying put means you’ll save that amount and can put the money towards upgrading your current home.
- Avoid associated fees with sales: With agents charging between 2-3% commission on the sale price, along with legals, loans and removalists, you can save yourself thousands by opting to stay put and renovate.
- Embrace the equity in your home: As your home appreciates in value, so does its equity. Homeowners can take advantage of this and use the equity to fund renovations. For example, if your home is valued at $800,000 and your mortgage is $600,000, you have $200,000 in equity. Generally speaking, banks will often allow a borrowing of up to 80% of the property’s value to undertake renovations. These home equity loans are a popular choice amongst renovators as they have much lower interest rates than personal loans or credit cards.
Read: UNO helped me pay for the renovations I’ve always wanted
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Why go?
- Avoid the danger of overcapitalising: Once renovations commence, it can be easy to start adding things to the “must-fix” list. However, be aware of what you spend and what your house is worth so you don’t overcapitalise. You could end up losing money in the long term if it cannot be eventually recovered.
- Sell up: While it’s impossible to predict the sale price for your property, if you do decide to sell, it’s a good idea to buy in the same market. If you buy and sell under similar market conditions, then the state of the market won’t matter as much as it would if you buy in a strong market and sell in a weak one.
- Beware Pandora’s Box: Take a moment to consider the house you are currently living in. If it is an older home, it is likely going to take a much larger cash injection before renovations even begin. Most of these homes will have hidden issues not visible to the naked eye, meaning it won’t be until you start the revamp process that you find unexpected costs for things such as rewiring or undetected asbestos. The reality is, sometimes you will not recoup this invested money, so it might be wise to trade up instead.
How much can I borrow?Use UNO's calculator to estimate your borrowing capacity.
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What next?
Whether you decide to renovate or relocate, take the time to weigh up all your options and talk to experts in the industry before you make your decision.
- If you decide to stay put and renovate, chat to a UNO expert about your refinancing options and see if you can secure a better deal
- Use UNO’s refinancing calculator to search through hundreds of rates
- If you decide to sell and buy a new home, find out how much you can borrow using our calculator.This information is general in nature and you should always seek professional advice when making financial decisions.Book a call in with UNO
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