Renovate Your Home Without Wrecking Your Budget

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We’ve all heard the nightmare stories about a renovation budget that has blown out by tens of thousands of dollars due to inadequate financial management and planning. No matter the size of your project, it is always smart to monitor the growing costs of your renovation rather than to wait until the end for a drum-rolling “grand total” — it will undoubtedly be grander than you ever imagined.

The truth is, while all home improvement projects start with the best of intentions, things can go wrong quickly if you are not careful with your finances. To protect your renovation from becoming another horror story, check out these simple tips to keeping on top of your finances when looking to renovate your property.


Before you start swinging the sledgehammer, create a financial budget. Factor in every possible expense you can think of, including the unavoidable costs such as council fees and the preparation of preliminary plans. Allow at least $2,000 for this. In addition, consider builder’s fees and materials, architect’s fees, storage fees and bank fees for taking out a personal loan or extending your mortgage. Be wary of overcapitalising, especially if the idea is to add profit to your home at sale. Always do you best to be strict with your money.

A smart idea is add a contingency of around 10-15% to your overall budget. The reason is there are always costs within the renovation that you may have under-estimated or not even considered. Having that 10-15% cushion will help you sleep a little easier at night.

Home Equity Loan or Personal Loan

If you’ve owned your home for a long time, it’s likely you have some equity on your mortgage that you can borrow against to finance the renovations. This is the most common way Australian’s finance their home improvement. While home equity loans usually have cheaper, more competitive interest rates than personal loans, be aware that, depending on your repayments and the mortgage term, adding the costs of the renovation to your mortgage will increase the term of your home loan – with interest. In addition, recognise that borrowing against the house means you could lose the roof over your head – renovated or not – if you can’t afford to make the repayments.

On the flipside, if you have recently purchased a home and do not have any equity available, a personal loan could be the preferred option to fund your renovations. A personal loan allows you to borrow anything from $5,000 for smaller projects right up to $50,000 for bigger home improvements. You can also choose to pay it weekly, fortnightly or monthly over a loan term from one year up to seven years. This can be a much faster way to cover your costs than adding them to your home loan.

Note, a personal loan has a much higher interest rate than a home equity loan and is better suited for financing minor renovations such as a new bathroom or kitchen.

Do-It-Yourself or hire a professional

You can save a bundle off the total cost of the renovation by doing the work yourself. That said, if you don’t know what you are doing, even the simplest jobs could not only break the bank but also your back. In fact, an injury can potentially put you out for commission for months, and end any hopes of completing the renovation on time and on budget. If you don’t know much about building, play it safe and hire the services of a certified architect, contractor, builder or design professional. These specialists have access to software for construction drawing so they can map out the floor plans and give you a visual aid for construction

At first glance, hiring someone to do the job may sound expensive compared to doing it yourself, but this is not always the case. A professional can bring a number of cost-saving ideas and trade-secrets to the table that you may not be aware of. For example, an architect or stylist often see problems with a renovation before they occur, whereas the problems may only become apparent to you after you’ve completed the work.

Additionally, builders can obtain cheaper rates on raw materials, as well as negotiate on your behalf with the local council on potential construction sticking points. Most councils will charge a fixed fee for every DA application submitted – whether it is successful or not – and without the support of a professional, a do-it-yourselfer could potentially find themselves lost in an expensive bureaucratic merry-go-round.

That said, the quality and prices associated with using an expert in the building industry varies dramatically. When choosing an architect or tradesman, it is important to ask around for advice, particularly from others who have been through the renovation process. Ask if they can recommend anyone, especially if you like the job that has been done on their renovation. In addition, shop around and get a minimum of three quotes for each task.

Other tips to keep costs and time down when renovating:

  • Keep a scrapbook of the things you like when it comes time to plan what you want it can all be easier to show the architect or builder the look you are after.
  • Plan for council approval; getting council approval for structural work, extensions, or additions can easily take 6 months or more – so plan ahead.
  • Complete the entire renovation in one hit, not in stages. There are many parts of the house that are interlinked e.g. plumbing, electrics, gas. If you a renovating a kitchen and bathroom, do them at the same time so that you don’t have to double-back in areas. Digging up a draining line for a second time is not only time consuming but unnecessarily expensive.
  • Consider the long-term costs. Pre-finished materials can be costly, but work well if it saves you time on an extensive paint or finishing job.
  • Reap big savings with recycled or lightly-used fixtures and building materials.

Renovations don’t have to be difficult or expensive. If you act early, have the right advice, borrow within your means and monitor a strict budget, a renovation can be extremely rewarding. Laying the foundations for a healthy renovation budget will not only keep your head above water, it will also reward you with a fantastic home face-lift or extension that will add value to your home when it comes time to sell.

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