Why you should renovate your home

Why you should renovate your home

There are numerous benefits to completing a home renovation, whether you plan on staying put or making the move to greener pastures.

Over one-third of Australians keep up-to-date with home improvement ideas, according to new findings from Roy Morgan Research. The number of people interested home decorating and design has increased 20 percent since 2010, highlighting what a house-proud bunch those with home loans have become.

If you’re tossing up whether to renovate, here are a few reasons that might give you a nudge in the right direction. 

You want to add value

Freshening up your bathroom or renovating your kitchen won’t just be for aesthetic benefit. By replacing dated countertops, ugly fittings and worn flooring, you may find that your property’s value actually increases — a huge plus whether you’re intending to sell or stay put. 

On average, a new kitchen adds $18,271 of value to a property (as of 2012/13), according to the Housing Industry Association’s Kitchen and Bathroom’s survey. Turn to the room of showering, scrubbing and teeth brushing, and you’ll find equally favourable figures — a new bathroom adds an average $13,986 value to a home.

You want to sell your home

Whether you’ve accepted a job in a suburb far away or your family is outgrowing the size of your home, there can be numerous reasons why selling up and making the move could be a good option.

Renovating your property in order to obtain a good re-sale price can be smart move. However, be sure you’re focussing on the right changes. 

It’s worth investigating what features similar properties in your neighbourhood have, and emulating these accordingly. If buyers are less concerned with a swimming pool or perfectly-manicured yard and more interested in modern kitchen space, tailor your renovation to match buyer preferences.

Start with small touches like cabinet fittings, shower heads and taps. Then you can move on to weekend-long jobs, such as painting your living room or bedroom. Shades like off-white, beige and cream are popular for their effortlessly chic vibe, while darker hues can add a sense of warmth and intimacy.

If your home’s layout is a burden, you might turn to big-ticket renovations that require you to knock down walls or add extra living space. However, make sure you don’t overcapitalise by spending more than you’ll make back.

You want to stay put

Just as renovating to sell can make sense, making changes to your shared areas, bedrooms or backyard for the purposes of staying put can be a wise idea.

If your children are enrolled at a quality local school, moving house could present difficulties – shift too far away, and you may end up out of the school zone. Perhaps you’re located to efficient transport links, making commuting to work a breeze.

It could be that your current suburb’s blessed with a friendly neighbourhood vibe.

If your external surroundings are top notch, consider renovations to make your property more comfortable, rather than selling up. You won’t necessarily have to use what’s in your savings account – if you have a home loan, you may be able to get a line of credit feature to fund your renovations.

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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).

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

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

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 equity? How can I use equity in my home loan?

Equity refers to the difference between what your property is worth and how much you owe on it. Essentially, it is the amount you have repaid on your home loan to date, although if your property has gone up in value it can sometimes be a lot more.

You can use the equity in your home loan to finance renovations on your existing property or as a deposit on an investment property. It can also be accessed for other investment opportunities or smaller purchases, such as a car or holiday, using a redraw facility.

Once you are over 65 you can even use the equity in your home loan as a source of income by taking out a reverse mortgage. This will let you access the equity in your loan in the form of regular payments which will be paid back to the bank following your death by selling your property. But like all financial products, it’s best to seek professional advice before you sign on the dotted line.

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

What is equity and home equity?

The percentage of a property effectively ‘owned’ by the borrower, equity is calculated by subtracting the amount currently owing on a mortgage from the property’s current value. As you pay back your mortgage’s principal, your home equity increases. Equity can be affected by changes in market value or improvements to your property.

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.

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.