Choosing Your Next Home Renovation Wisely

Deciding to renovate your home is a big decision, and can be an expensive one depending on the type of renovation to be done. As with many walks of life, home renovations can generally be divided into those that we need, and those that we want. In life, we need air to breathe, but we want chocolate gâteau to eat. Sure, we could choose the chocolate gâteau in favour of the air, but we’ll soon start to regret it. And so it goes, albeit on a less life-critical scale, for home renovations.

According to the Merriam-Webster online dictionary, the verb “to renovate” has two meanings:

1. to restore to a former better state (as by cleaning, repairing, or rebuilding)

2. to restore to life, vigor, or activity: revive

They are slightly, almost imperceptibly, different – and one definition is generally much more important than the other for the homeowner when considering how to spend their hard-earned renovation budget.

We often think of a home renovation as something which brightens up our living space, gives us more room, or makes us more comfortable. Consider an addition, or a fresh coat of paint, or a new bathroom. These renovations fall squarely into definition number two. They are restoring life to our home, and have the ‘wow’ factor which we love to share with our friends and family. These renovations also tend to add value to the price of a house, and people will talk about the return on investment that goes with them i.e. what the cost of the renovation is compared to the increase in price if the house were to be sold.

However, there is sometimes a far more important home renovation to be considered, and that, unfortunately, falls into definition number one. It is the maintenance renovation, the “restore to a former better state” renovation, the boring renovation – and the ratio of financial cost to “wow” factor absolutely stinks. This type of renovation includes things like a new roof, foundation repairs, pointing, insulation, and wiring – normally renovations you can’t see – and are generally the top priority of any home owner, no matter what situation they are in.

Take the case where the home-owner is happy in their home and they want to stay there to raise a family – they love the community spirit of the neighbourhood, it’s close to work, and there are ample facilities nearby. What is more important long-term? Stopping the basement from leaking, or getting a new kitchen? The answer should be obvious of course – renovating (restoring to a former better state) the basement is not only a necessary preventative measure from potentially significant damage to the house, but is also a requirement for peace of mind.

What about when the home-owner is trying to sell their house? It is well-known that a new kitchen has the best return on investment and can boost the value of a house significantly. It may be tempting to renovate this little profit maker first to get more money and to make the house more attractive, but there is a downfall – if there are any outstanding structural or major maintenance issues, the potential buyer, if they have any common sense, will find them when they have a structural survey performed. Depending on what the issue is, there could be one of several outcomes: a request for a reduction in price, a request for the work to be completed and re-inspected at the homeowner’s expense, or, as is quite often the case, a permanent retraction of the offer. It’s a hard pill to swallow for the seller, because typically a realtor’s price evaluation of their house has not taken into account the cost of this additional work, and yet by having the work done, there seems to be no benefit in terms of increasing the house value. In fact, of course, there is – it’s just that the evaluation was too high in the first place.

That said, there are always house buyers who will not do the proper ground work, so the required maintenance renovations are missed when the home is purchased. The seller, if they knew about the issue (as they often do), has gambled and “gotten away with one”, and the buyer has foolishly taken on someone else’s problems for the sake of the cost of a structural survey. A note to potential buyers: always, always, get a full structural survey done unless you are an expert yourself in such matters because the short-term additional cost will be far less painful than finding significant issues and having to deal with the associated heart-ache (and anger) after the purchase is complete.

So how does the average homeowner know if there are maintenance renovations that require attention? There are a few ways to find out, and sticking your head in the sand is not an option. That would be akin to not going for a regular check-up at the doctor or dentist – if no-one tells you there’s a problem, then there is no problem, right? Wrong.

The first thing to do is to call upon your gut instinct. You probably have a suspicion if the electrics might be an issue (there’s a spark when you plug appliances in, for example), or if there’s damp in the basement, or if the attic insulation is insufficient; after all, you’re the one who lives there. Take a look around the outside of the house for any signs of worsening damage – are cracks bigger than you remember them? Does the roof look patchy? Do you have an effective water management system – one that drains run-off water away from the house foundations?

Back this up by pulling out the home inspection that you had done when you first bought the home and going over it again (after you’ve blown off the dust). Make a list of the possible issues and prioritize them into those that are urgently needed and those you can live with. A very basic risk assessment would look at each item and give it a score of high, medium or low for the two categories of likelihood and consequence. Those that come out high-high, high-medium or medium-high are the most urgent and should be dealt with first.

The next step is to confirm your suspicions. It may be that you don’t need to do this if the problem is obvious – for example, if every time it rains you have a bath because the bath fills up from a leak in the ceiling, (a high-high issue in most people’s books), a call to a roofer sooner rather than later would be in order. On the other hand, there might be issues which you are unsure of such as visible cracks in the brickwork possibly due to a sinking foundation. This would rate in the medium-high category where the likelihood is unknown but has some supporting evidence (the cracks), and the consequence is financially significant (the house falling down). In a case such as this, or whatever your case might be where you are unsure of the cause of an effect, it’s time to consult with others. You may consider talking with family or friends who may have had similar issues, but this tends to leave more doubt as people’s natural reaction is to guess and err on the negative side. It is much better to talk to an expert in the field you are concerned with – if it’s the roof, talk to a roofer; the brickwork, talk to a stonemason; an electrical issue, an electrician. Go about the process as if you were intending to get have the work done (you may well have to) – get three quotes and therefore three separate opinions, and ask lots of questions. It may turn out that the cracks in the brickwork are merely superficial and become a high-low case, that is, the cracks are definitely there, but will cause no further problems. The low significance cases, regardless of the likelihood, are generally aesthetic and can be resolved at any future time you wish. As for low likelihood cases, they should, in general, not make it to your list.

A note about the risk assessment: if there is an effect you are observing you will have to think about all the possible causes and rate them accordingly. For example, a stain on the ceiling could be due a leaky roof, but it could also be due to a leaky pipe. Be sensible though (you have to stop somewhere) – it could also be spilled tea from a squirrel tea party, but it is quite unlikely.

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How To Lower the Cost Of Home Renovation

Home renovation is a fantastic opportunity for upgrading your home, improving the quality of life, and lowering the cooling and heating costs. However, the high costs of home renovation projects hold people back from undertaking one for their dream home. Although, the basic labor and material costs will remain the same, one can lower the renovation costs significantly by choosing less expensive lumber, fixtures, and other amenities.

Listed below are some of the basic tips which can help you lower the cost of your home renovation project.

Prepare a budget

Although it is the repetition of the same old word you hate, but the creation of a budget for your home renovation project is extremely important. You need to spend much more when working without a budget for home renovation. Budget creation must be the foremost step when going for home renovation. Analyze the estimated costs inclusive of the labor, permits, material, etc., clearly. Moreover, most of the renovation projects go over the budget. Hence, add an extra 15% to the estimated cost. After the addition the budget for your renovation project is ready.

The DIY sessions:

Carrying out some of the renovation tasks on your own can help you save a lot on the costs. However, you need to be aware of your skills and opt for the tasks accordingly. For example, if you have never engaged in the task of crack filling, you better leave this task to the professionals until you are willing to learn during this crucial time. Moreover, most of the people feel quite comfortable with the not-so-technical tasks such as painting. Therefore, carefully analyze your skills and thereafter opt for the task of your choice. However, in your attempt to save the money by doing the task yourself, never compromise with the quality and standard of work.

Invest in discounted shopping

Cutting down your home renovation costs doesn’t mean you have to compromise with the quality of work. As you are preparing for renovating your home, make sure you keep a watch on the local store sales and flyers. Many times, companies come out with discounted prices for their over stocked products. However, buy only those products that you need and don’t get swayed away by the heavy discounts. Moreover, you can also talk to your friends and relatives, who might have huge stocks of renovation products lying at their place. They might be willing to sell off their extra stuff at reduced prices. Some might even donate the items to you willingly free of cost.

Analyze the worth of investment made

Make sure you analyze that the investment made by you in your home renovation project is worth it. Will the renovation project render your home more valuable and help you reap huge benefits while selling your home off? Honestly, not all the renovations bring worthy returns in the long run. For example, by investing in bathroom renovation, you can get a payback varying between 75 and 100%. However, from flooring you can get a payback of only 50 to 75%.

On a whole, a home renovation project can be costly. However, if you pay attention to some of the basic tips, you will be able to reduce the renovation costs drastically. Till then, happy renovating!

Easy Ways to Find Finance for Your Home Renovation

The burning question on the minds of many Australian homeowners is – will I “Renovate” or “Relocate”? So, if you are one of these home owners, you may have also realised that the high cost of purchasing a new home and selling your current home far outweighs the challenges of renovating your current home. However, you should only renovate if the renovations will:

>> Add value to your home

>> Result in an improved standard of living

>> Be used to perform emergency repairs or full home extensions

Do Lenders/Credit Providers impose Restrictions on the Type of Renovations?

Subject to their credit policies and lending guidelines, most lenders/credit providers will let you borrow the funds to improve the value of your home for any worthwhile purpose, such as if you need to:

>> Add another bedroom, or any other room

>> Renew/update your bathroom or kitchen

>> Add a pergola and outside recreational area

>> Install a swimming pool

>> Extend your garage from a single garage to a double

>> Construct a secondary dwelling on your existing property

>> Any other structural or non-structural construction

What Methods of Finance can I choose?

Here are some examples of the popular methods to ensure easy home renovation:

Home Equity Loan – This financing arrangement is perhaps the most common way for Australians to finance their home renovation projects. A home equity loan works where you borrow the money against the value of your home. To illustrate this I have provided the following example:

>> The example assumes your home is worth $700,000, and

>> Your mortgage loan is $300,000

From the example illustrated above, you will have $400,000 equity in your home, which you can use to fund your renovation project.

The recent rise in-house prices has resulted in many Australian homeowners having acquired considerable equity in their property, this can make getting a home renovation loan easier for these people and reduces their need to dig into their own cash reserves.

Personal Loan – This financing arrangement is a suitable option for you to consider if:

>> You do not have any equity available in your home, or

>> You only have to complete some minor renovations

By choosing a short-term personal loan, you will find that:

1. The personal loan interest rate is much higher than a home equity loan, and

2. You may be limited to the amount you can borrow (e.g. from $5,000 to $50,000)

Construction Loan – This financing arrangement is available for you to complete large-scale renovation projects that require council approval and the services of a licensed builder. The lender/credit provider will impose the following restrictions when they are considering a construction loan for home renovation:

>> The lender/credit provider will not fund the full loan amount upfront to you

>> The lender/credit provider will release the money to you only in stages as the renovation progresses

Can I afford to Re-build my Home if it was destroyed?

You should already have normal home and building insurance in place, but you need to increase your building insurance to cover the costs associated with your home renovation project. So, if you cannot afford to rebuild your home if it were destroyed by damage from fire, or from any other natural disasters, you should ask yourself the following questions:

>> Do you have building insurance?

>> If you have building insurance in place:

1. Is the amount of insurance cover adequate?

2. What does your building insurance plan cover?

3. Does your insurance plan include Total Replacement cover or Sum Insured cover?

Don’t Delay and Take Action Straight Away

So, if you are thinking of renovating your home without any stress, you should seek advice from a professionally qualified and expert home finance broker who is a specialist in home renovation loans and, has helped numerous home owners when they had considered renovating their property.

He/she can arrange finance for your renovation project. A loan broker will provide you with a wide range of finance options and products after creating a budget for you. But, remember that you should be clear about your future plans as it will help you in choosing the right finance option.

Now that you have read this article, I sincerely hope it will help you to understand the easy ways of renovating your home with a professionally qualified and specialised finance broker.