Renovate or sell?

Renovate or sell?

The time comes in the life of many young families when they outgrow their home. That’s when the inevitable question rears its head: embark on a radical renovation or sell up and buy a new, more spacious home?

The decision comes down to two factors, according to architect Sam Crawford of Sam Crawford Architects – quantity versus quality. “Families generally consider renovating or moving when they need space,” he says. “Sometimes that is another bedroom or a second living room so the kids and parents can get away from each other.

“But when you drill down, it’s often better functioning spaces, spaces that are more comfortable, get winter sun, catch the breeze, are inexpensive to heat in winter, open to the backyard, or enable the parents to keep an eye on their young children playing without stepping on them. Often that does not involve more space but more intelligent use of space.”

The right kind of space

A bigger home – and a bigger mortgage – will not necessarily meet those needs, Crawford says. Buying a new, bigger house can sometimes buy you more “dumb space”.

“Dumb space is usually a large ill-defined living room that does not have a good connection to other rooms in the house or to the backyard, does not have good light or winter sun, has no outlook, is cold in winter and hot in summer,” he says.

What’s your budget?

Mary Anne Cronin, principal of Raine & Horne Bondi Beach, sees a lot of families facing the renovate-or-sell dilemma. Her advice is to consider the cost before making a decision.

“Renovation costs have blown out a lot,” she says. “People think they can get away with spending $100,000 on a renovation, but in most cases it’s around the $500,000 mark.”

Cronin relates the story of a client who bought a semi-detached home in Sydney’s seaside suburb of Bondi for $1.1 million and spent another $750,000 on an extensive renovation. The renovated home would not fetch $1.8 million on the market if the owner wanted to sell soon.

“It depends on your long-term view,” Cronin says. “If you’re staying there for many years and you are doing the renovation for your enjoyment, then it’s worth it.”

Before embarking on this life-changing journey, research all costs associated with renovations and selling and buying a new home, including comparing home loans to find one most suited to your needs.

Playing by the rules

If you decide to go down the renovation route, Crawford advises checking your local council’s regulations and approach to renovations before going ahead.

“It is worth asking an architect for advice if you are not sure,” he says. “Most architects will give you relatively inexpensive pre-purchase advice. A few hundred dollars spent pre-purchase could save you hundreds of thousands later.”

What’s your stress threshold?

Renovations can be incredibly stressful, so it’s worth honestly appraising whether you and your family are up for the challenge before getting started.

“There are always stresses. Choose the people you work with carefully,” advises Crawford. “Stresses can be minimised by going into the process knowing that things will come up that need to be dealt with in a balanced way. If you deal with people honestly and fairly, they will generally respond in kind. Builders and subcontractors are no different.”

Consider a mini-reno

Raine & Horne’s Cronin says there are bargains to be had in the middle of the market – homes that were renovated 20 or more years ago, and are therefore tired and dated, but have good structural bones. These types of homes can offer the space a growing family needs, and cost significantly less than a “renovator’s delight” – which appeals to people looking for a blank canvas – or a newly renovated home.

“There are opportunities to buy properties that were last renovated in the ’80s, so are quite daggy but the bones are good – then you can get away with spending $100,000 on cosmetic improvements,” Cronin says.

 

 

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e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

How do guaranteed home loans work?

A guaranteed home loan involves a guarantor (often a parent) promising to pay off a mortgage if the principal borrower (often the child) fails to do so. The guarantor will also have to provide security, which is often the family home.

The principal borrower will usually be someone struggling to find the money to enter the property market. By partnering with a guarantor, the borrower increases their financial power and becomes less of a risk in the eyes of lenders. As a result, the borrower may:

  • Qualify for a mortgage that they would have otherwise been denied
  • Not be required to pay lender’s mortgage insurance (LMI)
  • Be charged a lower interest rate
  • Be charged less in fees

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

What fees are there when buying a house?

Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.

Tip: you can calculate your stamp duty costs as well as LMI in Rate City mortgage repayments calculator

Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.

Keep this in mind when deciding if you are ready to make the move in to the property market.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.