Over the last few years low interest rates and increasing house prices have made borrowing to renovate your home a more preferable option. Instead of buying a larger property, homeowners have opted to renovate and/or extend their existing house.
However, has this era come to an end after the recent interest rate rise? Although interest rates have increased, the amount in which they have increased (0.25%) is very minimal and so is unlikely to have too much of an effect at this stage and the cost of borrowing still remains close to an all time low. Nonetheless experts are warning that this might be a sign of things to come and we should expect interest rates to continue to increase going forwards.
So should homeowners invest in their own homes and extend or do they sell up…
There is a new dawn on the horizon for the property market and although it is not quite here just yet, for the discerning homeowner it is a good idea to take advantage of the low interest rates while they still can. Renovating and extending your home not only makes it more comfortable and convenient for you whilst you are living there, it also enables you to add value to your property, whether that be personal value or monetary or both. For when you are looking to sell, adding an extension onto a property for example on current market trends adds an average of 11% onto the value of your house.
In 2016 a client of Byoot bought a 3 Bedroom Detached house in Northwood for £875,000 after they had used Byoot’s build and manage services overseeing a large scale renovation project. This project has been transformed into a 7 bedroom, 5 bathroom luxury home by adding a 2 story side extension, loft conversion and full internal refurbishment at a cost of £200,000. This property has recently been valued at almost £1.3m, this substantial increase in value is unlikely to have been obtained if the client had not decided to renovate.
Whether you are a first time buyer or a homeowner looking to move onto your next house the cost of buying a property is still firmly out of reach for many, with solicitors fees, survey costs and stamp duty making the process very expensive and many find that these costs often outweigh the costs of renovation.
When weighing up whether to renovate or sell up another consideration for homeowners is that due to expensive moving costs, and possibility of having to relocate which might affect commuting and schools, extending your existing home can sometimes be “better the devil you know”. With Byoot’s help extending and renovating could allow you to keep your family home and increase the space you have. Homeowners who have limited space particularly in cities like London should not only consider the possibility of extending upwards or outwards e.g. Rooms in the roof or extensions to the rear or front, as this might not always be possible and may mean too much of a compromise on things like garden space. It might be worth in this instance considering a basement extension, extending down has started to become a popular renovation trend and architects and interior designers can implement clever ways of maximizing natural light into basement extensions and also providing that extra space you desire.
For both first time buyers, the majority of whom tend to be millennials and also for homeowners who are already on the property ladder, buying a run down property to renovate and either sell on to make money, or to create a house more suited to their requirements is a much more affordable option which provides them with the same if not better result in the end.
Another reason prospective house buyers looking for a home to live in are better off buying a project house that needs restoration work, is that it is likely that any house that a new homeowner buys will need work done as it is not going to be designed and decorated to an individuals taste, it is usually the case that most people like to put their own stamp on their home.
A popular way to finance a renovation project for many homeowners is to remortgage, adding to your mortgage allows you to have some additional money set aside for renovation and many homeowners are keen to remortgage on a fixed term whilst interest rates are still at an all time low in anticipation for the inevitable and predicted future increase.
For the most financially savvy homeowner, completing renovation work as soon as possible with the view to sell on before interest rates go up again is a priority. This enables them to not only benefit from a close to all time low interest rate, but allows them to also make the most of high house prices and get the most value from the property they have invested in.
With all this talk about buying, selling and extending we are expecting the Autumn Budget to come out next week and there is a number of hints about the reduction or changes to the stamp duty for first time buyers and rumors have it that there is to be a proposed change to permitted development rights with called “build up not out” I have a feeling we are in for an interesting week ahead.