37% of Australian homeowners are renovating this year
Australia has become a nation of renovators, new research shows more than one in three homeowners are improving their homes this year.
A new RateCity.com.au survey of more than 1,000 Australians found that among people who owned property, 37% of those surveyed were modifying or renovating their homes in 2021.
Among renovators, the most popular amount to spend was between $ 5,000 and $ 25,000.
The survey also found that 22% of people who had saved for vacations in the past year, but couldn’t travel because of COVID, are instead using that money for a renovation.
Why are so many Australians renovating?
RateCity.com.au research director Sally Tindall said the lifestyle changes brought about by COVID have been a driving force for many Australians to renovate.
“Life in lockdown has saved many families money. In fact, according to APRA, there is $ 124 billion more in banking from households compared to a year ago when COVID started, ”she said.
“Expensive overseas vacations were delayed or canceled, saving people more money. Our survey also found that 22 percent of people who saved for vacations in the past year redirect that money to a renovation.
“In addition to dipping into savings, more and more Australians are also taking out loans to pay for their renovations,” she said.
In the past year, homeowners have taken out a total of $ 3.12 billion in loans for alterations, additions and repairs, according to the latest seasonally adjusted ABS data.
“Working from home made many people realize that they needed bigger, more functional homes.
“While moving to a larger home can often be an easy fix for people looking to upgrade, the lack of stock in a booming real estate market has made this option financially unsustainable for many families.
“Many people find it more economical to renovate their own home than to buy and sell, especially taking into account costs like stamp duty,” she said.
Options to finance a renovation
- Savings: Tapping into existing savings can be a simple, low-risk option.
- Offset / redraw: If you are ahead of your mortgage payments, you can withdraw that money. However, be aware that the longer it takes to remit that money, the more it will cost you in the long run.
- Remove equity from your home: If the value of your home has increased, you may be able to withdraw equity by refinancing. While the interest rate on a refinance deal is probably lower than on a personal loan, if you pay that money back over 30 years, it could end up costing you more in the long run.
- Construction loan: For large renovations or reconstructions, a construction loan can be added on top of your existing home loan. These loans can bear interest only for a period of time before reverting to principal and interest.
- Personal loan: Typically, you can borrow up to $ 50,000 for a personal loan to finance renovations and it can be secured or unsecured. Interest rates vary widely and often depend on your credit history. If you’re looking for “ green ” upgrades, there are ultra-low rate options available, including 0.99% CBA.
The cost of taking $ 50,000 on your home loan
RateCity.com.au has tightened the numbers on how much extra the average customer with a home loan balance of $ 500,000 and $ 50,000 in his compensation would pay in interest if he used his compensation money to renovate his home.
If they put the $ 50,000 back into the clearing account in equal installments over 5 years, they would pay an additional $ 6,533 in interest, than if they did not withdraw the money.
However, if they returned that money over 10 years, instead of 5, the additional interest paid would rise to $ 12,605.
|Scenarios||Estimated total interest paid over 25 years||Additional interest paid by subtracting $ 50,000|
|Leave $ 50,000 in matching account for the remainder of the loan||
|Withdraw $ 50,000 in compensation and return the money over 5 years||
|Withdraw $ 50,000 in compensation and return the money over 10 years||
Source: RateCity.com.au Assumes $ 500,000, 25 years remaining on home loan, payment of principal and interest on the existing average RBA customer variable rate of 2.95% and the first payment back into the clearing account occurs on day 1. Assumes monthly payments and interest rates remain the same. The calculations are only estimates.
Homeowner Renovation Tips
- Factor in a buffer as budget blasts are common.
- If you take out a loan or use your compensation / redeployment, pay back the money as quickly as possible.
- Compare ratings and quotes by joining home improvement forums and talking to friends.
- Get multiple quotes from traders and suppliers.
RateCity.com.au Research Director Sally Tindall said, “Consider a tampon, because when it comes to renovations, rashes are common.”
“If you get a loan to finance your renovations, figure out how much extra you will have to pay both in your monthly repayments but also over the life of the loan,” she said.
“If you are withdrawing money from your clearing account or reprocessing facility, try to return it as quickly as possible. The longer it takes to repay the money, the more interest you will pay.
“Joining a remodeling forum or talking to friends who recently remodeled their homes can help you find suppliers and traders, ”she said.
How many people renovating this year plan to spend
|Less than $ 5,000||22%|
|$ 5,000 – $ 25,000||40%|
|$ 25,000 – $ 50,000||15%|
|$ 50,000 – $ 100,000||ten%|
|Over $ 100,000||13%|
Source: RateCity.com.au survey
Personal loans for home improvement