As we step into spring selling season in Australia, there’s a subtle shift in the way homeowners are approaching their housing decisions. More homeowners are deciding to renovate. That alone is not surprising. What is different this year, however, is that some reports are suggesting that homeowners are choosing to renovate instead of selling their homes and upsizing. What is motivating more Australians to renovate their homes this year? We’re here to provide insights and clarity on this evolving trend.

Why Would Australians Renovate Instead Of Relocating?

• Financial Constraints: The soaring costs of selling and buying larger homes are pushing some homeowners to their financial limits. They simply can’t afford the expenses associated with upsizing.
• Desire for Modernisation: Another factor driving the renovation trend is the desire for a more modern and updated living space. Many homeowners are choosing to invest in renovations to bring their existing homes up to their desired standards.
• Increasing Home Value: Renovations can significantly boost a property’s value. Homeowners are recognising this potential for increased returns and are choosing to renovate as a strategic financial move.
• High-Interest Rates: Some are finding themselves anchored to their current properties due to high interest rates on new loans. Staying put and renovating becomes a more financially prudent choice in such circumstances.
• Future Investment: Renovating isn’t just about immediate comfort; it’s also seen as an investment. Homeowners may be planning to either sell or rent out their properties once the renovations are complete.

As part of our continuous effort to understand your unique homeownership journey, we consulted our experts for their insights into this trend.

The Surge In Renovation Loans

Bhisan Raj KC, General Manager of Mortgage Broking at Home Loan Experts, offers some intriguing data. He reports that in the previous fiscal year, cash-outs and loan top-ups accounted for approximately 5% of total submissions. However, in the current fiscal year, the trend started at 5% in July and doubled to 10% in August, with the majority of these transactions directed toward financing home renovations. This sharp increase in renovation financing supports the assertion that Australians are renovating even more this spring than usual. But the question remains, why?

Homeowners Are Moving

Jonathan Preston, Home Loan Experts Senior Mortgage Broker, doesn’t see a big trend emerging. He underlines that while some individuals naturally gravitate towards larger homes as their families expand, the choice to renovate instead of pursuing a new property is not yet a widespread one. Although there may be a subtle uptick in homeowners opting for renovations to remain in their current residences, it hasn’t become a dominant trend, he says. This carries implications for the construction industry. Preston points out that renovations still require the engagement of builders and various skilled tradespeople, particularly for structural enhancements. Consequently, while new home constructions may not be experiencing a surge, the construction sector remains actively involved in renovation projects.

How Much Can I Borrow For Renovation?

When it comes to financing your renovation or rebuilding project, your options can vary, depending on the project’s scale and your choice of builder. Here are some financing options to consider:

• Minor Renovations with a Licensed Builder: Typically, you can borrow up to 95% of the purchase price, covering both the value of the property and renovation expenses, for cosmetic updates.
• Minor Renovations without a Builder: You can generally secure up to 90% of the purchase price, inclusive of renovation costs, for smaller projects where you choose not to engage a builder.
• Major Renovations: For big remodelling projects, you can typically borrow up to 80% of the project costs. However, with a contract builder, you could access up to 95% of the purchase price plus renovation expenses.
• Knockdown and Rebuild Projects with a Licensed Builder: You can usually borrow up to 90% of the land value or 95% of the total land cost, which includes construction expenses.
• Knockdown and Rebuild Without a Builder: If you decide to embark on a knockdown-and-rebuild project without a builder, you can still secure up to 60% of the combined land and renovation costs.

When it’s time to renovate, trust a mortgage broker to simplify your financial journey. We’ll guide you through the process, ensuring you have the resources you need to complete your projects to perfection.

Exploring Renovation Financing Options

Financing your dream renovation can be a big step, and we want to ensure you have the knowledge you need to make the right choices for your home.

• Use Your Savings: Consider tapping into your personal savings, the funds you’ve diligently set aside, or those accrued in your offset account. These resources can be a great starting point for financing your home renovation, putting you in control of your project.
• Leverage Existing Equity: If you’ve built up equity in your property, it’s a valuable asset that can help you secure a loan tailored to your renovation needs.
• Construction Loan for Major Renovations: For extensive remodelling projects, a construction loan can provide the necessary financial backing.
• Cash-Out Refinance: Explore the possibility of refinancing your mortgage to access additional funds. It’s a flexible option that allows you to cover your renovation expenses with ease.
• Energy-Efficiency Loans: Look for lenders offering energy-efficiency loans with reduced interest rates. These loans are aimed at promoting eco-friendly home improvements, helping you create a more sustainable and efficient living space.

At Home Loan Experts, our commitment to homeowners looking to renovate or sell their property runs deep. Our team is passionate about assisting you at every turn. If you’re among the growing number of homeowners looking to transform your property through renovation, rest assured that we have the lending solutions to help you turn your vision into reality. Call us on 1300 889 743 or complete our free online assessment form today.