Dos and don'ts for your do-up

  • 06/03/2018
Banks can give loan top ups for cosmetic work, like painting, new carpets or refitting the bathroom.
Banks can give loan top ups for cosmetic work, like painting, new carpets or refitting the bathroom. Photo credit: Getty

Seven years ago Simon Bass and his partner Angela finally made it onto the property ladder - but it wasn't quite their dream home. The 1940's bungalow in Auckland's Sandringham was patched up, draughty, and firmly stuck in the past.

"Lemon, peach and orange were the predominant colours," Simon laughed. "It was quite painful on the eye."

Last year the couple decided to "drag it into the 21st century" - but renovating hasn't been without its challenges.

In the current market, many homeowners are choosing to renovate, rather than move. Jackie Smith, from Harcourts Takapuna, said first home buyers should also be looking at do-ups: "I would say any house that's got the opportunity of adding value to for your future is a great house to buy."

Where to start

ANZ Mobile Mortgage Manager, Vuko Jabucanin, said buyers should always get a builder to inspect the property first. "I get feedback from clients - it's a do up - why do I need a building report?" he said. The builder will expose any hidden structural issues, like rot or foundation movement, and problems like asbestos. The cost to fix them may make the project too expensive.  

Paying for it

The bank will decide how much clients can borrow based on a combination of affordability and how much equity they will have in the property. Depending on their circumstance,  banks may lend up to 90% of a home's value.  

Vuko said in some situations you can request a top up for cosmetic work, like painting, new carpets or refitting the bathroom. If the work is structural, and requires a building consent, the bank may ask for a registered valuation to assess what value is being added to the home.

Vuko checks his clients have planned carefully, and budgeted for everything. He said people were sometimes caught out by unexpected costs, like having to re-pile the house to sustain the planned extension - adding up to $80,000 to the bill.

The builder is crucial

Vuko said the most important element of a renovation is a capable builder. He advised using a well-established company, checking references, and asking to see previous work. A good builder might be more expensive - but a lack of mistakes will save money in the long run.

Where should you spend your money?

For those renovating to sell, Harcourts' Jackie Smith said buyers were swayed by new kitchens, bathrooms and good indoor-outdoor flow. They also looked for good insulation, and heating systems. She recommended investing in the areas of the house people use most. "Things like tapware. Those are the things that get touched and played with every single day and cheap taps look cheap," she said.

Don't over capitalise

ANZ's Vuko Jabucanin said knowing when to stop spending was crucial.  "If you're looking to sell, make a very detailed budget as you want to make sure you'll get your money back come sale time." To help, ANZ provides free Property Profile reports to customers which estimate their home's market value based on recent sales in the neighbourhood. You can use these reports as a basis when you start to plan your renovation budget.

Make sure it's legit

Vuko said it was vital to follow council requirements. Failing to get building consent would mean the property can't be insured. If you try to sell, a buyer's bank may not approve a mortgage on a non-compliant property. The majority of building companies provide warranties on their work, to give extra peace of mind.

Allow for the unexpected

Simon and Angela should be cooking in their brand new kitchen now. Instead, it's still a building site, due to a mix up over the plans. His parents arrive from the UK in two weeks' time. "There's a bit of panic stations there," he said. The couple has spent more than they planned - their kitchen appliances cost five times more than expected - but Simon said it was worth it for their forever home and they have added significant value. Their total bill will top $300,000 - but given they bought for $540,000 and houses with similar renovations in the area sell for $1.3 million, the value they have added is clear and they are confident they have not over captilised.

Finally, their best advice is to get the right people involved. They relied heavily on their tradespeople to help with design. "Questions like 'what kind of architrave do you want?' I don't even know what an architrave is!" Simon said. "These people are professionals for a reason and I want their advice."

Before starting your renovation it's important to do your homework and start off by talking to your tradesman, a local real estate agent and the bank.  

This article has been created for ANZ. For help finding the right home loan solution for your needs, visit www.anz.co.nz/mmm

ANZ DISCLAIMER: This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product.