Interest rate announcement – July 2021
The RBA last changed the cash rate in November last year, reducing it to an unprecedented low of 0.1%. This was an unprecedented move from the RBA which reveals that, while the economy has begun to bounce back, the path to full recovery from impacts of COVID-19 is likely to be extended well into next year at least. This month, RBA left the rate on hold at this level and reaffirmed its commitment to continue to help support the economy through this recovery phase.
Are you considering renovating, knocking down and rebuilding or relocating? Here are 7 things you should consider!
1. Location, location, location!
These are said to be the three most important words in real estate and to a certain extent that is true. If you love where you live and the area suits your family’s needs for the short and long term, you may decide to renovate or rebuild on the same block. While you can change many things about a home, you can’t change its location.
2. The grass is always greener…
Check out the homes for sale in your local or preferred area. There may be a home nearby that has already been extended and updated. Work out what your budget would have been to improve your current home. Don’t forget to include a value for the pain and suffering of living through a renovation and possibly having to rent somewhere else for all or part of the time. When buying another home, make sure you include fees, stamp duty and all the other incidental charges like reconnecting electricity and gas. With all this information, you can then decide whether you would prefer to move to the renovated home or renovate your current home.
3. Don’t overcapitalise
Renovating your home will mean that you can put your own stamp on the property but make sure you have done your sums. If your home is a three bedroom one bathroom home worth $400,000 in its current state and you intend to spend $50,000 on the renovation, are nicely updated three bedroom, one bathroom homes selling for $450,000 or more in your area?
4. A fixed price contract
If you have enough equity in your home, the financial institution may allow you to redraw against your current loan to complete the renovations. You can then do the work yourself or engage the necessary contractors. If you do not have enough equity and need to borrow some money, the financial institution may treat your renovation as a ‘build’ and you will need to have a fixed price contract from a builder to complete the work. The financial institution will then look at the contract and your current home to ensure that the work will add sufficient value to the home.
5. Do it yourself
Are you planning to do much of the renovation yourself to save money? Obviously you will need to employ tradespeople for the plumbing, electrical and gas works but you may want to have a go at other aspects of the project. If you are working fulltime remember you will be doing the work in the evenings and on weekends and therefore it is going to take a lot longer to complete. How feasible is it for your family to live in a construction site for a number of weeks or months? Can you live for that time without a kitchen or maybe a bathroom?
6. Knock it down and start again
This can sometimes be an appealing option but remember the loan you took out from the financial institution bought the land and the house. If you are bulldozing the house you are knocking down the bank’s asset! Financial institutions will normally only look at this option if your mortgage is down to about 80% of the land value. Don’t forget to factor in that you will need to live (and pay rent) somewhere else while you are building.
7. Subdivide and profit
If your home is on a large block of land you may be able to subdivide and sell both blocks to make a greater profit or build on one and sell the other to help build your new home. Check with your Council to see what their rules are on subdivisions including block sizes and frontages. Usually houses on a main road are required to have a wider frontage. Remember to factor in both demolition and subdivisions costs.
Our Current Best Interest Rates
The best home loan rates we currently have available:
- Variable rate of 2.29% pa (comparison rate: 2.48% pa)
- 1 year fixed rate of 1.89% pa (comparison rate: 2.75% pa)
- 2 year fixed rate of 1.84% pa (comparison rate: 3.73% pa)
- 3 year fixed rate of 1.88% pa (comparison rate: 2.99% pa)
- 5 year fixed rate of 2.24% pa (comparison rate: 2.41% pa)
Assumptions: <$400,000 loan, owner-occupied purchase, principle & interest, LVR < 80%.