Africa-Press – Zimbabwe. Home renovation has long been a solution for homeowners whose properties have begun to show signs of wear and tear before their time. If you are lucky enough to own a house and able to afford a renovation chances are you have found yourself wishing for a better home environment. Or perhaps you have ought, “If I am to spend all this time at home, I may as well make it more pleasant around here.”
Budget
How, then, to decide how much you can afford to spend? There are no easy answers, and a lot depends on property market conditions where you live, how much financial risk you are willing to tolerate and how much you are prepared to forgo luxuries in other parts of life. But as an ex-financial counsellor and former consumer credit educator, here are the questions I encourage you to ask yourself to help you decide how much to spend. Start with thinking what you want to do and getting a good idea of how much it is going to cost. Then, factor in extra for unexpected surprises along the way.
Can I drive down other household costs?
At this point, although this is a good thing to do at any time, look for ways to reduce household costs. If you need a loan, are you getting the best possible interest rate from your lender?
If you are on a variable rate, you can tell them, “I am thinking of borrowing more but I notice the rate you have on my loan on is higher than others are offering.” Often they will knock something off your interest rate straight away. If you are on a fixed rate, you could change to another lender but remember to account for break fees.
Can you reduce other costs by getting a better deal on car insurance, health insurance and phone bills? Often you can get better prices just by calling your providers and pointing out their competitors have a better deal.
Think about your upcoming spending and income
What expenses are coming up in the next few years? Will you likely need a replacement car soon? Are schooling costs or childcare fees on the horizon? If you went all in on a renovation and could no longer afford holidays, nights out, entertainment spending, would you be comfortable with that? Think also about income.
If someone in the household could not work due to illness, or wanted to or had to work part-time, how would that affect monthly payments? If something goes wrong or you have an unexpected medical cost, could you afford it even with the extra debt that comes with the renovation?
What is the return on investment?
This is where the sheer craziness of the real estate market comes into play. Even very conservative financial commentators are forced to admit that the property market shows no sign of slowing or stalling. It is quite likely a renovation would drive up the resale value of your house but unfortunately there is no easy way to find out by how much.
Much depends on where you live. If you are in a regional area where prices have not grown as stratospherically, you might need to plan for a more moderate growth in the value of your house. If you are fortunate enough to have property in a major city, your house value is likely to appreciate even if you do not renovate.
So if your only concern is increasing the resale value, the market may take care of that anyway without the stress of renovation. There is still a shortage of property and demand is on the rise. But past performance is not always a reliable predictor of future outcomes. So you need to think about how you would manage if there was a big shock to the economy or to your household.
Crucial
Ultimately, it is up to each person to decide what life you want to have over the next decade or more.
It is good having an improved home but if you cannot afford to travel anywhere or ever have a night out again, you need to factor that in. If you can, see an independent financial adviser, it is not a bad idea before you make a decision.
Source:theconversation.com
For More News And Analysis About Zimbabwe Follow Africa-Press