Home renovation budgeting

With travel plans currently on hold, many of us have put those savings into sprucing up our own homes.

In fact, spending on renos spiked shortly after lockdowns began and has been going strong ever since. Our recent 'Home Is Everything' competition certainly supported this, with hundreds of entries pouring in to show how our homes have become our offices, gyms, playgrounds and schools. 

With extra money in the bank and extra time at home, now could be the ideal time to make some changes. But whether you're overhauling your entire property, adding a home office or just tidying up, you'll need to create a budget and sort your finances before you get started. 

To sell or not to sell?

When renovating, it's important to think about your 'why'. Are you renovating to create a home you want to live in, or are you getting your property ready for sale? 

• If you're renovating for sale, it's generally a good idea to make sure your renovations are as cost-effective as possible to avoid overcapitalizing (spending more than your profits from the sale). It's also practical that any changes you make an appeal to as many potential buyers as possible, rather than just your own taste. 

• If you're renovating for yourself and your family, your main consideration maybe how you can change your home to best suit your lifestyle and taste within your budget. 

Keep your reason for renovating at the back of your mind throughout the entire process, especially while budgeting. 

The secret to budgeting for home renovations

Before you hammer a single nail, you've got some serious planning to do to create a detailed budget that will allow you to complete your reno without spending more than you originally intended. Get started in five simple steps:

1. Decide exactly how much you can afford to spend by taking a close look at your budget and thinking about how you'll fund your renovations – options here could be savings, a personal loan or a home loan top-up. Our detailed budget calculator can be a great way to understand your current budget and what you could have available for your renovation.
2. Next, it's recommended you figure out what you'd like to change in your home and how you're going to go about it – will you be DIYing, or hiring a builder?
3. Then it's time to start getting quotes from builders and other tradesmen. It's a good idea to get at least three fixed-price quotes - you may be surprised at how much they vary.
4. Once you've chosen a builder, you'll need to drill down to the details. Confirm with your builder exactly what's included in the quote and what isn't - having this conversation now could help avoid nasty (and expensive) surprises in future.
5. Finally, once you've got a quote and you've discussed it with your builder, you should consider putting aside money just in case your renos go over budget. A good rule of thumb is to put aside 10% of extra funds as a contingency. 

Financing for renovations 101

If you're planning to make substantial changes to your home, it may be worth considering what your options are when it comes to financing your plans:

Paying cash is a simple, straightforward way to cover the cost of your renovations - if you have it available. With that said, if you're using existing savings, you'll need to be extra careful not to exceed your budget while also building in a buffer in case of any over-runs. 

The Government's Home Builder programme provides eligible owner-occupiers with a grant of $25,000 to substantially renovate their homes. To qualify, you'll need to have a building contract for renovations valued at least $150,000, as well as meeting other eligibility criteria. Apply and check if you're eligible through your State or Territory's website. You can also read more about this programme in the Treasury Fact Sheet.

A loan top-up may allow you to increase your home loan and use those funds for renovations if you've got excess equity and can afford to make repayments home loan repayment calculator. The benefit of a loan top-up is the ability to access low home loan interest rates and a long loan term. 

Refinancing your home loan may be another smart way to fund your renovations. This involves paying off your existing loan with a new loan and increasing your borrowing to fund renovations. 

A personal loan could be a good idea for smaller amount renovations.. With a Qudos personal loan you'll get access to low variable interest rates, flexible repayment options, $0 accounting fees and a loan period of one to seven years (for amounts between $5,000 and $25,000). 

One of the most important steps of any renovation is budgeting thoroughly and getting your finances ready to go. Before you pick up the tools, plan out your budget, arrange your finance and remember that your team at Qudos Bank is always available if you need a hand.