- Should you renovate right now?
- How will you pay when you decide to renovate?
- How to renovate without breaking the bank
So you have decided to renovate. You already have a million ideas buzzing around in your head and you can see the perfect colours and textures complementing each other in the rooms of your house.
Unfortunately, reality comes crashing down when you see the prices of the different materials you need to use.
With inflation rising to 6.5%, everything is getting more expensive. It might feel as if a home renovation is too far out of reach. The good news, however, it is not impossible.
If you budget carefully and prioritize renovations that will increase in value, then you can afford to remodel during inflation.
Here are a few tips to consider when starting the process.
Should you renovate right now?
The answer to this question is quite simple: if your budget allows it.
The average price of a home remodelling is based on the square meter of your home. According to statistics published earlier this year, the cost for a home remodelling is between R800-R2000 per square meter.
A fully renovated kitchen will cost you between R50 000 and R150 000 whilst a bathroom renovation will be between R15 000 and R55 000.
These prices are all dependent on the type of materials you want to use, the fixtures you want installed, and the complexity of the project.
It still remains that kitchen renovations deliver the highest returns whilst an unnecessarily luxurious bathroom might not be worth it in the long run.
Relates Reading: 7 Easy and Affordable Home Improvement Ideas
How will you pay when you decide to renovate?
It isn’t always possible for homeowners to pay cash when they are renovating. It is also not always the best option when paying for home renovations. You might end up using emergency funds or all your savings to finance it.
Luckily there are other options like a home equity line of credit, a home equity loan or a credit card.
Here is a quick breakdown of these options:
1) Home equity line of credit
When opting for the home equity line of credit option, you are essentially borrowing money from your home loan.
The amount you can borrow will depend on the amount of equity you have in your home, your credit score, and your debt-to-income ratio.
You build up equity as you pay off your bond and the more you pay off, the more equity you acquire.
One of the advantages of this option is that you are using the equity of your house almost like a credit card that you can pay off at a lower interest rate than a new loan.
However, these rates are prone to rising and falling as the market conditions change.
2) Home equity loan
A home equity loan is similar to a home equity line of credit but in this case, you receive a lump sum that you pay back in monthly instalments.
A home equity loan is usually set at a fixed interest rate.
This makes it a less unstable option when paying for home renovations.
3) Credit card
Many homeowners opt to pay for renovations by credit card. However, this might not be the best option for everyone.
If your renovations are small enough and can be paid off quickly, a credit card is a great solution. Larger renovations usually take a few years to pay off and in this case, a credit card would not suffice.
When you use your credit card whilst the inflation rate is high, your interest rates will also be much higher.
If you have to pay back more interest, the cost of your renovation project is going to exceed your budget.
How to renovate without breaking the bank
You might be thinking that a large renovation project is simply not in the cards for you at the moment.
That doesn’t mean, however, that you cannot add value to your home by doing other, smaller renovations.
You can focus on DIY projects and low-cost additions that won’t render you totally broke when they are completed.
You can start by redoing the carpets or installing new light fixtures in the rooms. Adding a fresh coat of paint to the walls is the easiest way to make a home feel brand-new again.
Relates Reading: 5 Simple Steps to Bathroom Renovations Without Ruining Your Finances
The goal of renovations is to add something to your home that will increase in value. It can be tough to do this during inflation, so do enough research, don’t overspend, and make sure you choose the right payment options that pose the least risk for your personal situation.