Deciding to either renovate or rebuild is a big decision for any homeowner and the truth is, there is no right answer.

Both options come with significant investment, planning and inconvenience to your everyday life, however the end result, when done right can mean a significant improvement to your living space.

For the majority of people, both options will require either refinancing, using a drawdown or rolling an additional loan facility into your existing home loan.

Many of my clients ask me which option I think is better, and my response is largely dependant on the client, their current situation, financial capacity and long term goals.

Anyone who is considering either renovating or undertaking a knock-down-rebuild on their existing land should consider the following questions.

What are the ongoing expenses of owning a new home over renovating an existing property?

It is no secret, that older houses can cost more to maintain and operate. An older federation home with structural, electrical or plumbing issues is always to going to cost more in the long run than a newer, more energy efficient and modern home designed and built to current building standards.

That being said, there are many homes, even federation homes that are very structurally sound, have been well maintained over the course of their existence which may not present any significant additional costs. The first thing to do, when considering renovating vs rebuilding is to invest in a licensed building inspector that will be able to identify whether there are any major causes for concern that would immediately make a knock down the smarter choice long term.

What is your personal style, and how long do you plan on living in the property?

This is an important question to ask, as everybody’s style is different and there is currently a trend towards newer and more modern homes being more sought after than older, or unrenovated spaces. It is important to ask how long do you see yourself and your family living in the property. If your taste leans more towards an older style renovated property and you plan to be there for an an extended period of time, then this might not be as much of a concern as if you are only planning on being in the home for a few years, before you try to sell.  

That being said, there is a difference between an ‘older’ property and a tastefully ‘restored’ older property. It can’t be argued that Australia is home to some amazingly renovated federation homes, which have a sense of character that just can’t be matched with a new build. Beauty is in the eye of the beholder, and there will always be room in the market for both new and older properties.

Which option is cheaper?

The answer to this question largely depends on just how far you are wanting to go with your existing home renovation. If you are wanting to undertake smaller, more targeted projects such as a kitchen or bathroom replacement or backyard makeover then more likely than not renovating will be a much cheaper exercise than a knockdown rebuild.

However, renovations come with uncertainty and there are many homeowners out there who have discovered this the hard way. If you come across some unexpected structural damage or major utility issues such as plumbing or electricity then costs can very quickly get out of hand. If you can, get your builder to take responsibility for the building inspection, and build a fixed price clause into your contract. This means that if anything unexpected arises you will be safer than having an open-ended agreement that leaves too much to interpretation.

What level of inconvenience and impact can you and your family handle?

Whether renovating or rebuilding, your family is going to be inconvenienced. Renovating often means living in a construction zone, and depending on how many projects you are undertaking at a time, this could mean months of living in and around the chaos that comes along with any renovation.

That being said, a knockdown rebuild means that you will most likely need to move yourself, your family and your belongings into another house whilst the construction takes place. This could be anywhere from 9 months plus and the risk of this blowing out is very high.

Think carefully about which way to go, as it is a decision that you will literally be living with for potentially 12 months or more.

What can I afford?

This is another big question that needs to be asked. Often when you consider a rebuild, you are lowering the overall value of your property, at least in the short term by demolishing the existing dwelling. A lender will want to know that when the build is complete that the value of the property and land will still be acceptable in terms of LVR.

Obtaining finance for a rebuild can be tricky, so it is always best to speak with a qualified mortgage broker, builder and valuer to ensure that your dream of building a new home is possible and to find out the best way to make this dream a reality.

Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au