Here’s why you should hold off on renovating your home this Christmas
Wednesday 11 December 2019
Whether you feel particularly jolly at this time of year or not, one thing is clear, as a whole, Aussies are a pretty festive bunch. In fact, we’re so festive that according to a recent survey conducted by ME Bank, a significant 64% of Aussies are rushing to renovate their homes before Christmas.
While some said the timing was purely coincidental, ME found preparing for guests over the holiday season and using the deadline of Christmas as an excuse to tick off to-do items were two pretty big reasons for making home improvements at such a busy time of year.
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But of course, while it’s great to give your home a facelift every now and again, it will mostly always come at a price. According to ME’s survey, renovation budgets ranged from as little as $200 to as much as $7,000 with the average household spending $1,731 on home improvements.
As ME money expert Matt Read said, “Making your home look nice before Christmas is understandable but it can add to the financial pressure of the holiday period.”
Ideally you would want to be able to save up to pay for your home renovation, but let’s be realistic, sometimes that just isn’t possible. So if you are thinking of making some improvements, but your wallet is a little light, you may want to consider some other financing options.
What are my options and why should I hold off on renovating at Christmas?
You might have already had a look at personal loans on offer, but if you currently have a home loan then another, perhaps smarter alternative might be to refinance.
Of course, the process of refinancing might take you a little longer than it would to take out a personal loan, hence why you may have to hold off on renovating this Christmas.
That said, if you do manage to snag a great home loan interest rate and you go about it the smart way, using a refinance home loan to cover your renovation costs rather than taking out a personal loan could help you save money in the long run.
How to use a refinance home loan to pay for your renovation
First of all, it’s never a bad idea to review your home loan every few years, to make sure you’re still getting the best deal. And if you haven’t done so for a while or in fact never, now is the perfect time to see what else is out there and take advantage of the all time low home loan interest rates available at the moment.
Now the key to using a home loan to pay off a personal loan is to make sure that you can pay it back in a fairly short period of time. You don’t want to be paying back your renovation costs over the full 25-30 year lifespan of your home loan, because you’ll most likely wind up paying even more than you would have with a personal loan, in interest.
So in this case you would probably want to make sure that you get a split home loan, meaning that you can separate your home loan into different portions or accounts, this could be 50:50 or even 80:20.
You can then focus on repaying the ‘extra’ loan amount over a shorter period and with that, you also want to ensure that any new home loan you refinance to does allow you to actually make extra repayments.
Other handy features you may want to keep on your radar when searching for a new home loan include an offset account, a redraw facility and the ability to make early repayments without incurring a penalty.
So if you’re thinking of making some changes to your property this Christmas, but feeling the financial pinch, it might be worth checking out refinance home loans, to help distribute the overall costs.
If you don’t know where to start, why not check out a few of the refinance home loans compared by Mozo below or head to our refinance home loans comparison page for a full list.