How to stick to a shoestring renovation budget

Renovate your house without breaking the bank by researching material and labour costs, being realistic and getting the appropriate finance for the project.

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Estimating your budget, sticking to it, and keeping tabs on your expenditure are essential for effective renovation
budgeting and planning.

Renovation budget

Typically a realistic renovation budget is around 5% of the purchase price for the property-- although this will vary greatly depending on the scale of your renovation budget-- this gives you a starting point. For example, for a $850,000 property you would need to set aside $42,500 for the project.

While it may be tempting to opt for a heated towel rail or a home theatre system, you need to be careful.

It's a good idea to break-up each component of your renovation so you know what percentage of your budget you should allocate to different areas.

The below is an example of how you could break up a $42,500 budget.

RoomBudget percentage (%)Budget amount ($)
Bathroom25%$10,625
Kitchen25%$10,625
Master bedroom & ensuite15%$6,375
Guest bedroom15%$6,375
Laundry10%$4,250
Contingency buffer10%$4,250

How to estimate your renovation costs

Work out your project objectives

When setting your renovation objectives, it's a good idea to start with the end in mind. To ensure your renovation is realistic, you should set objectives that are S.M.A.R.T. (that is specific, measurable, attainable, realistic and timely.

For instance, if you're planning a landscape renovation you need to consider exactly what features you're spending the money on (e.g. pergola and outdoor BBQ), the amount of money you need to spend on each item (e.g. $15,000), whether or not you can afford it, and the projected timing of your project (e.g. 3 months).

This will not only help you gauge your cash flow for the project, but it will also help with your time and project management- if you don't set a deadline, you'll never finish!

Be selective about splashing out

Your renovation will likely involve some degree of compromise, so be careful about the elements where you decide to splash out on, and those where you cut costs. You need to separate 'needs' from 'wants'.

Consider where it will be worthwhile cutting costs and areas where it makes sense to spend more. For instance, splurge on high-traffic or frequently used areas such as a kitchen floor and opt for cost-effective solutions in areas that won't be used as frequently, such as a guest bedroom.

You can speak with a local agent to determine where you can save and where you should splurge based on similar properties in the market. This will help you understand what will add value to your property in the long term.

Research your costs

Not only should you research material and product costs, but you should also become familiar with the labour and installation costs of different trade services, such as plumbing, electrical work and concreting.

You can use resources such as PayScale, the Australian Bureau of Statistics (ABS) or Service Seeking to compare the average labour costs for different Australian states.

For each renovation task (e.g. bathroom tiling), you should source at least three different quotes from suppliers to ensure that you're getting a fair market price.

During this research stage, it's a good idea to contact your local council or building authority to ensure that you're not breaching any codes or regulations.

Quotes from tradespeople

When enlisting a team of professionals, make sure you get itemised, written cost estimates to ensure that there is no ambiguity about what is included, or not included in the price.

Consider hiring a building inspector to assess whether any structural work needs fixing, because any major repair expenses will need to be factored into your budget.

Additionally, you should speak to an architect and request detailed drawings of your renovation plans, as well as licensed builders and specialised tradesmen, to get a complete outline of the costs involved for each project element.

How to estimate your renovation costs

Break it all down

A list of estimated costs to renovate a kitchen.You need to break down the costs of the renovation by each individual task. For instance, rather than labelling one element "tiling", you need to break down this task into separate cost items such as 'clean up', 'cost of tiles' 'waterproofing' and 'labour' (by square meter).

As well as estimating the separate costs, consider the property value and the risk of over capitalising with your project.

Understanding the value of your property can help plan the renovation budget. For instance, a kitchen renovation may cost between $5,000 to $50,000 depending on the scale of the renovation as well as the appliances and fixtures you select. Generally, it is recommended that you spend 5% of the value of your property for a major kitchen upgrade.

Beware of hidden or unnecessary costs

Speak with people to highlight any costs that you may not have considered in your budget and planning, such as the cost of waste disposal. However, don't fall into the trap of thinking that you can minimise costs by purchasing fixtures and materials yourself- remember that professionals buy in bulk, so they're entitled to a trade discount.

If possible, don't move plumbing and electrics as this can add significantly to your costs due to the cost of removing and installing new pipes.

Track your expenditure

Keep a record of your receipts and maintain a budget spreadsheet that's up-to-date. By keeping track of invoices and receipts, you'll have a clear idea of your cashflow and you'll be less tempted to splurge on that underfloor heating.

Remember to speak to a tax specialist before you start your renovation or investment project so you understand the tax implications involved.

Make sure you record any variations or unexpected costs for your project, as this may help with future planning and decision making.

Consider a fixed-price contract

Some builders offer fixed-price contracts which may be useful because it will allow you to know your costs upfront which can facilitate your cash flow and budgeting.

Have a contingency buffer

One of the most critical components of budget planning is to have a contingency buffer of funds to ensure that you're financially stable if things don't go as planned. As a rule of thumb, you should set 10-15% of your overall budget aside for any unexpected costs that may arise in future.

Finance your renovation the right way

There are various ways to finance your renovation. You could just pay cash if you have enough saved up. You could also top up your home loan or refinance it to borrow a bit more. This can work out cheaper than using a personal loan because the interest rate is lower (but because a mortgage lasts for decades you might end up paying more, so crunch the numbers first).

A line of credit is a smart option for home renovators who want flexible access to cash and are unsure exactly how much they're going to pay, or when. This is an option if you have some equity in your home already. A lender can approve your for a specified credit limit, but will only charge you interest on the money you spend.

You could get approved for a $60,000 credit limit and spend $15,000 upfront in renovation costs, and spend $20,000 a month later when the project is complete. You end up borrowing $35,000, and you only pay interest for the $20,000 once you pay it, not before.

Compare the latest refinancing home loans below

Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

HSBC Fixed Rate Home Loan Package P&IHome 2Y Fixed≥ 20% Deposit

HSBC Fixed Rate Home Loan Package
1.88%
2.65%
  • App: $0
  • Ongoing: $390 p.a.
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit.Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

UBank UHomeLoan Fixed P&IHome 1Y Fixed≥ 20% Deposit

UBank UHomeLoan Fixed
1.79%
2.18%
  • App: $0
  • Ongoing: $0 p.a.
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.

Greater Bank Great Rate Fixed Home Loan P&IHome 1Y Fixed≥ -10% Deposit

Greater Bank Great Rate Fixed Home Loan
1.59%
2.15%
  • App: $0
  • Ongoing: $0 p.a.
Get one of the lowest rates on the market with this fixed rate mortgage. NSW, QLD and ACT residents only.

86 400 Own Home Loan Fixed P&IHome 1Y Fixed≥ 20% Deposit

86 400 Own Home Loan Fixed
1.94%
2.55%
  • App: $250
  • Ongoing: $250 p.a.
Fix to this very competitive rate for one year. This loan requires a 20% deposit.

Well Home Loans Balanced Fixed Home Loan P&IHome 1Y Fixed≥ 10% Deposit

Well Home Loans Balanced Fixed Home Loan
1.87%
1.89%
  • App: $250
  • Ongoing: $0 p.a.
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
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Compare the latest line of credit home loans below

Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

Well Home Loans Equity Plus P&IHome≥ 40% Deposit

Well Home Loans Equity Plus
1.82%
1.85%
  • App: $250
  • Ongoing: $0 p.a.
Borrowers with 40% deposits or equity can get this low variable rate loan. 100% offset account included.

Bank First Equity Line of Credit P&IIOInvestment≥ 20% Deposit

Bank First Equity Line of Credit
4.49%
  • App: $300
  • Ongoing: $300 p.a.
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Compare the latest construction home loans below

Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

Greater Bank Great Rate Home Loan P&IHome≥ 20% Deposit

Greater Bank Great Rate Home Loan
2.19%
2.20%
  • App: $0
  • Ongoing: $0 p.a.
Fund the construction of your new family home with a very competitive variable interest rate.

loans.com.au Green Home Loan IOHome≥ 10% Deposit

loans.com.au Green Home Loan
2.08%
2.39%
  • App: $0
  • Ongoing: $0 p.a.
Construction Loan: A competitive variable rate loan available for the construction of an energy-efficient home.

loans.com.au Green Home Loan IOInvestment≥ 10% Deposit

loans.com.au Green Home Loan
2.59%
2.90%
  • App: $0
  • Ongoing: $0 p.a.
Construction Loan: Investors building an energy-efficient property can get a discounted rate on this green investment loan with interest-only repayments.
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