- There’s no objective answer, but we’ll help you determine which option is best suited to your situation.
- Building a home is the most costly but allows the most freedom in terms of forging a home in your image.
- Renovations are likely to be the least costly, but are dependent on what your location will allow for.
- Buying a home is the easiest solution, but you may have to pay for maintenance or renovate the new home to suit your requirements anyway.
Renovate, build or buy a property? Three options, and a decision that has ramifications not just in terms of financial costs, but your quality of living.
So which one is it? It should come as no surprise that there’s no objective answer to this question; it’s entirely dependent on your situation. What we can do, is determine which option is best suited to a particular situation. We can also provide the pros and cons of each approach.
Renovate or buy a new home (or build one): Factors to consider
- Lifestyle factors
1. Cost of renovation vs buying / building home
This is obviously one of the key factors you’ll want to take into account.
Buying a home
- Pro: At least when you buy a home, you can easily determine what it will cost you by looking at the property value.
- Con: Buying a home means paying transfer duty, transfer costs and bond registration costs.
Renovating a home
- Pro: Costs less on average than building or buying a new home.
- Pro: No transfer costs, transfer duty or bond registration fee.
- Pro: Renovations can add value to your home. Kitchen renovations especially can boost the value of a home with only a few alterations.
- Con: You may live in an area that is overpriced, making it difficult to improve the value of your home.
Building a home
- Pro: No transfer duty
- Pro: You save on potential maintenance costs.
- Con: Building a home costs 20-30% more on average than buying a home.
2. Lifestyle factors
Buying a home
- Pro: Established homes are more likely to be situated in suburbs with attractions, facilities and access to business hubs. They’re more likely to have pools and gardens, so you won’t have to add such features.
- Pro: If you don’t like the area you’re in, you can move somewhere that better suits your needs.
- Con: You’ll be moving into a home that had previous occupants, so it may not feel as fresh as you’d like.
- Con: You may have to make changes to interior decor to suit your own tastes and preferred lifestyle.
- Con: You may be moving into an older building, meaning you’ll have to pay to make it more tech-friendly and energy-efficient.
Renovating a home
- Pro: If you like the area you’re in, you can stay.
- Pro: If you have sentimental attachment to the area you’re in (maybe it’s where you grew up, or the place you raised a family), you can stay.
- Con: The construction will be disruptive and you’ll probably have to move out for the duration.
Building a home
- Pro: The property will be brand new. You’ll be the first to live in it.
- Pro: The property can be built to modern standards; energy-efficient and tailor made for tech features.
- Con: It may be difficult to find a plot of land in an area close to the city centre.
In summation, renovation is the preferred option if you like the area you’re in and aren’t certain you can find a location better suited to your needs.
Buying a home makes sense if you want to move, have an idea of what you can afford and want to be able to move into a new home without waiting for construction to be complete.
Building a home is for people who want a brand new, state of the art construction tailor-made to their needs.
Your options for acquiring funding
Buying a home: This is relatively straightforward, you apply for a home loan from a bank. This usually requires an upfront deposit equal to 10% of the value of the property, although you can acquire a 100% home loan, which removes the need for a deposit (freeing up those resources for transfer and bond registration costs).
A home loan comparison service such as ooba Home Loans can submit your application to multiple banks, allowing you to compare deals and choose the best one.
Renovating a home: You have several options available when it comes to financing renovations.
You can refinance your bond, which means you borrow from the home equity available on your home loan. Home equity refers to the difference between the property’s market value and the outstanding balance on your bond. Any amount you’ve paid into your bond is also considered home equity.
You can also apply for a home equity loan, which is the same as applying for a home loan.
Another option is to apply for a personal loan. A personal loan is easier to acquire, although it needs to be paid back over a shorter term, and may not be enough to cover major renovations.
Building a home: You can apply for a building loan. The process is the same as applying for a home loan.
One major difference is that the bank pays out the building loan in stages. A portion of the loan is paid out each time a stage of the construction is completed.
If you choose to purchase a new home, it helps to get prequalified. This will provide you an estimation of what you can afford, and will notify you of your credit record so you can determine your chances of home loan approval.
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