Renovations are an expensive undertaking. The average Australian who did a renovation in 2018 spent around $25,000, according to the Australian Bureau of Statistics (ABS). The costs can be worthwhile though - a national survey from Raine & Horne real estate agents revealed a new lawn, for example, can increase the value of a home by up to $110,000.
Smart technology can boost your home's value too
You're not just limited to lawns. You can upgrade your home by installing smart technologies like solar panels which can save on energy costs. Veronica Gravolin, co-founder of real estate sales platform Airlisting, says that some of the more in-demand smart home upgrades include smart security features and smart air-conditioning systems.
"People love those house locks that can be accessed from your phone, doorbells with cameras that go to your phone, having everything connected to Google Home is always liked, air conditioning that can be turned off and on from your phone is also liked by a lot of people," Ms Gravolin told loans.com.au.
"High-tech gadgets, such as smart home technology, is undeniably good - buyers love it, tenants love it, everyone loves it.
"That being said, real estate buyers are so smart and so informed. They will always buy the property that best meets their needs and has great fundamentals or the criteria they are looking for over a property that doesn't meet their criteria but has cool gadgets."
Ms Gravolin said these features don't always increase the value of a house, but can help it stand out when it's time to sell.
"If you are wanting a quick sale at a great price, spend your money on what will most appeal to your buyer. If you have multi-coloured walls and old damaged carpet, you're better off spending on a neutral paint job and re-carpet than on fitting your home out in cool tech," she said.
"However, if your home ticks all the boxes and you want to make it stand out amongst the crowd, tech gadgets for the home can help in doing that."
So in other words, these gadgets can help sell your house, but if there are other problems, you might want to consider making other renovations first.
How do you fund these renovations?
If you decide on a tech upgrade for your home, there's still the matter of how to pay: that $25,000 average isn't pocket change. Most people don't just have thousands in spare cash lying around, while methods like personal loans or credit cards can be very expensive.
While smaller smart technology additions might not cost quite that much, it still won't be cheap. Smart Wiring, which is just the beginning of installing smart tech, can cost at least $2,000, while the appliances themselves can cost more than this.
Two ways you can utilise your home loan to fund renovations include using a redraw facility in your home loan or refinancing to access your home equity.
Refinancing your home loan
Your home equity is the difference between your home's value and what you owe on your home loan. If you have $300,000 to repay and your home is worth $500,000, then your equity is $200,000. If your home's value has risen to $250,000, then you have $250,000 in equity.
You can access this equity and use it by refinancing your home loan. You can generally borrow up to 80% of your loan-to-value ratio and might need at least 20% equity to avoid paying Lenders Mortgage Insurance. This can be a good way to access funding for renovations, especially if you've already been living in the house for a while or have paid off a sizeable portion of your loan.
According to loans.com.au Managing Director Marie Mortimer, refinancing for renovations is a go-to strategy if funds do not exist.
“If you require council approval for your larger renovations, with the assistance of a valuer, your lender will take into account the expected increase in your home value when they give you the loan to unlock the future equity available after the renovation,” Ms Mortimer said.
If your home loan has a redraw facility, then you can withdraw any additional repayments you've made on your home loan so far. So if you've paid $20,000 extra in addition to your minimum repayments (and good on you if you have), then you could possibly withdraw some or all of that $20,000 to put towards renovations, depending on your home loan.
Ms Mortimer said redraws provide easy access to equity built up within your loan facility.
“We have some customers who build up equity in their loan and then redraw that money to fund their renovations," Ms Mortimer said.
She said that with this strategy, customers weigh up the value of the redrawn funds versus interest payable to decide if it’s worth the investment, although conditions will likely apply depending on the scope of work to be done.
Use construction loans for larger projects
For larger renovations requiring structural changes (like removing foundations and walls), you might need to go one step further and use a construction loan. Construction loans work differently to home loans: you receive the loan in increments as the work passes various milestones, and you only pay interest on the amount you have drawn down.
Ms Mortimer said renovations in excess of $100,000 need to be noted as constructions, with renovations over $200,000 requiring your entire loan to be refinanced to a construction loan.