Top 4 home renovation lessons courtesy of The Block

Top 4 home renovation lessons courtesy of The Block

Since hitting TV screens back in 2003, The Block has become such a mainstay of Australian television that it’s hard to remember a time when it wasn’t on the tube. It’s a natural fit for Australians, given our historical love of DIY and mucking in.

Last July, Roy Morgan noted that The Block was among the country’s top 20 best-loved shows, and that fact still applies to its most recent season. According to FreeTV Australia’s TV Ratings Report, The Block: Triple Threat winner announcement drew in a combined national audience of nearly 2.9 million viewers. 

Of course, it’s not all about the drama and entertainment value; the fights, the judges and the competition. The Block also has plenty of lessons to teach anyone who has refinanced a home loan for renovations. 

1. Natural is in 

Where once the finest properties were characterised by sleek designs aimed at disguising the home’s true materials, The Block: Triple Threat has taught us the value of letting it all hang out. It also taught Sydneysiders Josh and Charlotte, who wowed judges early on with a lime-washed timber wall in their bedroom and another made from exposed brick in their living room. Queensland couple Jess and Ayden similarly impressed with their copious use of natural wood in the lounge. 

The use of unadorned, natural materials can add a cosy, rustic feel to a home. Not only do they lend greater authenticity and aesthetic appeal to the property, but they could also raise the value of your home, if you’re planning to eventually sell and put the profit into your savings account.

2. Don’t go overboard

The hunt for that one, perfect feature can drive you crazy, particularly if you’re something of a perfectionist. Often, it’s those small, barely consciously observed details that can make one room pop and another flop. Unfortunately, this can also lead you on wild goose chases in the hunt for the ideal material, as Jess and Ayden found out during their bathroom renovation. 

The couple spent an unbelievable $20,000 on marble tiles, with Jess failing to realise the couple had an actual set budget to work from. Hopefully, you won’t make the same mistake with your reno — check your budget and make sure you’re not overdoing it with the credit card on any one particular feature.

3. Aim for harmony

Two good design features don’t necessarily add up to create a pleasing overall design. Adelaiders Tim and Anastasia were slammed by the judges for this type of thinking, in their second lounge and dining area reno, The couple couldn’t seem to decide between styles, and appeared to choose them all — industrial pendant lights, wooden table, fabric chairs, pink flowers and a candle. 

Though they were going for “high end luxury” and “boutique hotel”, the combination of disparate elements hurt the rooms as a whole. Your home renovation will likely end up being pricey — make sure you think about the overall design when you’re spending money on features.

4. Be practical

In all the hubbub about design, aesthetics and visual harmony, it can easy to forget the practical side of things. This is a space you — or at least somebody — will have to eventually live in, so you have to make it, well, liveable!

Contestants on The Block are constantly being pinged by judges for not taking into account practical considerations. All-stars Darren and Dea, for instance, took some heat for their re-worked bathroom because of its failure to provide adequate splash protection in the shower, the lack of anywhere safe to place plugged-in electric instruments and a towel rack that was much too far from the shower. Josh and Charlotte’s bathroom, meanwhile, was criticised for lacking sufficient light, ventilation and room around the basin.  

Remember that the judge of your reno project won’t be someone that gives you a score at the end of the week like in The Block, they could be a home buyer, so make sure the property you’ve designed is easy to live in.

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Learn more about home loans

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

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. 

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

I have a poor credit rating. Am I still able to get a mortgage?

Some lenders still allow you to apply for a home loan if you have impaired credit. However, you may pay a slightly higher interest rate and/or higher fees. This is to help offset the higher risk that you may default on your repayments.

I can't pick a loan. Should I apply to multiple lenders?

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success

Will I be paying two mortgages at once when I refinance?

No, given the way the loan and title transfer works, you will not have to pay two mortgages at the one time. You will make your last monthly repayment on loan number one and then the following month you will start paying off loan number two.

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

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.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002