Archives December 2020

A Federal Government program offering cash grants for housing construction projects has been extended, but at a lower amount.

Key points:

• The HomeBuilder program, due to finish at the end of the year, will be extended until March 31
• Contracts signed between January and March next year will attract a lower rate of $15,000
• People will be given more time to start construction and price caps in NSW and Victoria will be lifted

The HomeBuilder scheme currently provides $25,000 grants to eligible people building a new home or renovating an existing one.

It had been due to expire at the end of the year but will be extended to 31 March, 2021, at the lower rate of $15,000.

Prime Minister Scott Morrison said the extension was expected to lead to another 15,000 construction projects, bringing the total anticipated renovations or builds under the program to 42,000.

“It’s critical we keep the momentum up for Australia’s economic recovery,” Mr Morrison said.

“Extending HomeBuilder will mean a steady pipeline of construction activity to keep tradies on the tools.”

Price caps and time limits changed

Property price caps for new builds in two states will be lifted for contracts signed between January and March next year, rising to $950,000 in New South Wales and $850,000 in Victoria.

The amount of time all approved applicants who signed contracts on or after June 4, 2020, are given to start construction will also be extended, from three months to six months.

The decision follows calls from the construction industry for more flexible deadlines, with concerns people could miss out due to a bottleneck of applications. 

The Federal Opposition had also called for changes to the program, arguing it had failed to deliver on its promises and amounted to a “marketing exercise.”

The changes have been costed at $240 million, bringing the total expected price tag to $921 million.

Of the around 24,000 applications made to the scheme so far, the majority (19,180) are for new builds while the rest (4,697) are for renovations.

Keeping everything in and around your home in good working condition can give you peace of mind, protect your asset and save you money. That’s because without routine home maintenance, larger (and potentially avoidable) repairs or replacements can cost you hundreds or thousands more than you’re prepared to pay.

“Most things in your home have a lifespan or a maintenance schedule,” explains Kevin Busch, vice president of operations at Mr. Handyman, a company that provides handyman and remodeling services. Being familiar with these maintenance needs and the cost, Busch says, can help you anticipate and budget accordingly.

How much does home maintenance cost?

When it comes to estimating the cost of home maintenance, a good starting point is to save at least 1 percent of your home’s value each year. That means if you own a $240,000 home, you would set aside a minimum of $2,400 a year, or $200 a month, for maintenance costs.

Of course, if your home is older or in need of extensive work, you’ll need more money stashed away. Even newer homes can cause headaches — that’s life as a homeowner — so consider saving more, if you can, as a cushion for unexpected home repairs.

Another way some homeowners budget for maintenance is to sock away 10 percent of the total cost of their property taxes, mortgage and homeowners insurance payments. If your combined taxes, mortgage payment and insurance costs $4,000 a month, you would put away $400 each month for maintenance.

“Taking into account the geography or region of your home and the factors that may play into the wear and tear of your home and appliances is important, too,” Busch says.

One easy way to set aside money for home maintenance is to set up automatic payments to a savings account.

“If you look at it in small chunks, it doesn’t seem so overwhelming,” notes Russell Catron, HUD housing counseling coordinator at the Tennessee Housing Development Agency. “That little bit of money will add up if you make good decisions.”

5 ways to save money on home maintenance

Home maintenance can be a sizable expense, but you can save yourself money and still keep your home in tip-top shape with preparation and some smart strategies. Here are five simple ways to save money on home maintenance:

1. Do it yourself

To really save on costs, you can do simple fixes yourself — think snaking the drain or redoing a small section of chipped paint — instead of hiring a handyman.

Catron, for his part, watches videos online to learn how to do projects like fixing a garbage disposal.

“If you had a plumber come in to fix it, it would cost $75 just for the visit, and that doesn’t cover any parts or labor that would be added on if the job takes a lot of time,” Catron explains.

When weighing whether to do something yourself or to outsource the task, remember to consider how handy you are and how easily you can pick up a new skill. In some cases, you may actually be better off having a pro come in.

2. Hire a quality professional

If you do have a home maintenance need that requires a contractor, consider spending a little bit more for quality service. Oftentimes, a higher cost means the company carries specific licensing and insurance, which makes them a significantly safer and more reliable choice, potentially saving you from having to pay to fix shoddy work later on.

“The lowest price is often not the best choice,” Busch says, adding that you should always research the company or contractor before agreeing to a job, and check their credentials. You can also find reputable contractors by asking people you trust for a recommendation or referral.

3. Keep up with preventative maintenance

To stave off bigger, more expensive repairs, continue your basic home maintenance projects, which might cost you a little bit now but most likely save you from a large bill later.

Water damage due to plumbing issues, for example, can often be held off with routine tasks, like cleaning the gutters, sealing cracks and attending to leaks or clogs quickly.

Other preventative projects include:

• Replacing smoke alarm batteries
• Keeping your home clean
• Taking care of pests
• Repainting your home’s exterior

4. Cut your energy expenses

At least one home maintenance task, changing your air conditioning filter, can actually save you money in utility costs in addition to preventing the need for a new unit or repair.

To make sure you stay on top of this easy project, set a calendar alert for every one to three months, depending on the manufacturer’s recommendations and any environmental influences.

Other energy-saving measures can help, too. For instance, adding a programmable thermostat can help you save on energy costs and reduce unnecessary wear on your HVAC system, Catron says.

“Also, check with your electric company if they have hours when electricity is cheaper,” Catron recommends. “That’s when you could be doing your laundry or run your dishwasher.”

5. Focus on immediate needs

In a pinch, you can prioritize the parts of your home that need attention now instead of the projects that are “nice-to-dos,” Busch says.

“Consider what will happen if you don’t address an issue,” Busch says. “Will it cause a bigger issue, create additional issues or create a safety hazard?” These are all important questions to ask when determining which maintenance tasks or repairs to prioritize, and considering them can help you save money right now.

Bottom line

Being a homeowner takes a lot of responsibility to care for your home, and discipline to set aside funds for maintenance and repairs. With these tips, you can save money each year and protect the asset you worked hard to purchase for years to come.

“One of the values of homeownership is building equity,” Catron says. “We have to remember to continue building that equity; we have to maintain our homes. The house does not take care of itself.”

Closing the purchase of a new home is a feeling unlike any other. Unfortunately, many people new to homeownership may not know how just much maintenance a property requires. Regular maintenance is an integral part of retaining your new property’s value and ensuring you don’t have to deal with costly repairs later on.

As the adage goes, an ounce of prevention is worth a pound of cure. To this end, we asked 12 experts from Forbes Real Estate Council to provide tips to help new homeowners protect their life-changing new investment.

1. Complete a thorough inspection prior to purchase.

The best defense against costly repairs is being proactive before you buy your home. Make sure to complete a full inspection that will uncover any expensive issues lurking around the corner. It’s important to confirm the remaining years of use for all the primary systems, the structure and the roof. With this information, you can budget properly and minimize surprises. -Joanna Schwartz, Quartz Properties

2. Don’t wait until it’s time to sell to schedule an inspection.

I advise my clients to get a home inspection every few years. Too often, homeowners wait until they’re about to sell their home or the escrow process to have a professional take an in-depth look at their home. By then, a newly discovered issue could be very costly. Hiring someone with a trained eye who knows what to look for is a good way to stay on top of routine maintenance and repairs. – Brad Le, Compass

3. Trim back surrounding trees.

It may be one of the less glamorous tasks on the list of to-do’s when a buyer first moves in, but trimming back any tree branches that touch the house or roof will keep pest and rodent infestations away. – Beatrice de Jong, Opendoor

4. Start with the HVAC filters.

It’s hard to suggest only one task, as there are a few important ones, but one thing first-time homebuyers should definitely do is replace the HVAC filters, then clean the gutters and do some boiler maintenance. These should be done twice a year. Then there are the big three: plumbing, heating and electrical. These are very important to every property owner—especially first-time homebuyers—and could become costly if not maintained properly. – Valon Nikci, Link NY Realty

5. Don’t defer comprehensive maintenance.

Deferred maintenance can catch up to any homeowner. Monitor wood that may be rotting, sign up for programs to have your air conditioning checked twice a year, and don’t forget about pest control. Keeping an eye on your roof, plumbing, AC, electrical and drainage will benefit you when it’s time to sell your home. -Anna Morrison Lee, Anna Morrison Lee, Broker Associate, Moreland Properties

6. Keep an eye on plumbing and drains.

One very easy maintenance item homeowners should keep on top of is the plumbing and drains in their homes. Roots, deposit build-up, etc. can create problems at the most inopportune times. Look into a maintenance plan with a well-established plumbing and drain company. You will thank yourself. – Michael J. Polk, Polk Properties / Matrix Properties

7. Stay on top of your roof.

Ongoing repairs and maintenance are part of life’s rich tapestry when owning a home. As someone who has managed commercial and residential real estate, one area has always stood out: Be watertight! Keep an eye on the roof and drainage. These are the first lines of defense in protecting the external membrane, and if this seal is penetrated, the real problems begin. Literally, stay on top of your roof! – Damien Moore, Haüskey Inc.

8. Regularly caulk leak-prone edges.

Homeowners should constantly caulk edges around the home that are prone to leakage of air and water. Such home components include edges of windows, doors, bathtubs, bathroom sinks, kitchen sinks, countertops and the like. Damaged caulking may lead to leaking of air and water, causing mildew, mold and other structural issues. This may lead not only to expensive repairs but also to health issues. – Amit Inamdar, Own Sweet Home Realty

9. Get rid of the dust.

It doesn’t matter where you live—dust is ubiquitous. Dust buildup typically happens in places we don’t regularly check and can dramatically shorten the lifespan of refrigerators, washers, dryers, HVAC systems and other major appliances. Committing to regular dust removal and filter replacement will keep you healthy, reduce fire risk and save money over the long term. -Gary Beasley, Roofstock

10. Drain and flush your water heater.

One thing all homeowners should do is drain and flush the water heater once a year. This extends the water heater’s useful life by preventing sediment build-up that could clog your heater and cause other problems down the road. – Jason Hsiao, Shaw Investments

11. Invest in a home warranty policy.

To mitigate risk, purchase and renew your home warranty policy. I recommend that all buyers get this, and you can often request that the seller pays for the first year in your offer. After year one, it’s just a nominal fee to keep it active and it’s worth it for peace of mind if you don’t have significant savings for repairs or if it’s an older home. Nowadays new homes usually come with some warranties. – Catherine Kuo, Elite Homes | Christie’s International Real Estate

12. Set up reminders for regular maintenance.

Make sure to set up reminders for regular maintenance around the house. This includes changing AC filters and having the unit serviced regularly, checking smoke detectors, checking the water softener salt levels, and walking the property to check for signs of rotted wood or leaks around the roof and siding. Addressing repairs early on will save money in the long run. – Melissa Johnson, We Buy Houses San Antonio, TX

Australia’s scorching summer temperatures have many people cranking the air-conditioner at home to escape the heat.

Unfortunately, the comfort of a cool home comes with a price: A high power bill.

Sure, dropping the temperature another one or two degrees is easy in the moment, but it’s not always the most efficient or budget-friendly solution.

However, a leading sustainable building expert says making some “quick wins” around the home can lead to substantial savings.

CSIRO building simulation research lead Anthony Wright said a common blunder families make when retrofitting their home is focusing on “big ticket” items first, such as double glazing and new insulation.

As a result, they neglect more urgent needs, like fixing draughts and ensuring rooms are closed off by doors to regulate climate.

“Looking at draught sealing your home is a really good place to start to combat the gaps and cracks under doors and around windows,” Mr Wright told The New Daily.

“You can buy these very simple seals at your local hardware store and they can make an enormous difference.”

Once households address those leaks, they can set about improving their ceiling insulation and window treatments – external blinds for houses that struggle to repel heat, while heavy drapes can help in winter.

And for families with larger budgets, double- or triple-glazing windows and swapping out energy-guzzling appliances and light fittings with a higher energy star rating alternative can help drag down electricity bills.

Mr Wright also encouraged renters to negotiate small-scale interventions with their landlords in the form of draught sealing and – for states with applicable schemes – accessing rebates to install solar panels.

Renovations push the savings to the max

Modernising a home can push the savings into the stratosphere.

Mr Wright said most homes built from the post-war period to the late-1980s were built with little thought for insulation, and an orientation that maximises sunlight in winter and shading for summer months.

Which is why, he says, the average Australian home is only rated 2.2 stars (out of 10) for energy efficiency.

But, if the average Sydney or Melbourne family renovated their home to hit 4.9 stars, they can save up to $480 per year.

If they went the “whole hog” and upgraded their hot water system, air-conditioning and some appliances to boost their rating to six stars, that annual saving could increase to $900, he said.

By going further and installing solar panels, they could potentially offset their entire energy consumption.

But Mr Wright stressed that renovators should ensure they separate the newer rooms from older sections of the house to avoid cancelling out those benefits.

“It’s also worthwhile getting an energy rate involved early,” he said.

“It can seem like it costs, but it will pay back in comfort and energy bill savings in spades over time, as they can do a before-and-after rating, and also provide consultation on tweaking your renovation as you go.”

Hundreds saved despite ‘summer from hell’

CEO of Botanic Gardens Australia & New Zealand Eamonn Flanagan was a self-confessed sceptic before he enlisted Canberra-based sustainable firm Light House last year to retrofit his home.

Despite the home’s relative modernity, his guests described it as “a cave” due to its frigid conditions over winter – and he thought installing under-floor heating was the only solution.

After conducting draught testing through the home, the architecture firm suggested sealing gaps underneath doors (one gap was 22 millimetres wide) and behind appliances.

Along with improved insulation around light fittings and new curtains, he estimates the overall cost of the retrofit came to $15,000.

And then came the “summer from hell”.

“We made these changes in November, and when people came around wearing masks, they couldn’t believe there was no smoke inside because they knew our house previously,” Mr Flanagan told The New Daily. 

“And in terms of our air-conditioning bill, we had it on more last summer because it was so much hotter, but because our rooms were sealed, we had it on 24 degrees instead of 22 and for less time as the room would reach a comfortable temperature more quickly.”

Mr Flanagan estimates he saved $300 on every quarterly gas bill through winter despite working from home during the pandemic, while his electricity bills dropped by $150 last summer.

And he said while the changes carried a large upfront cost, they would eventually pay for themselves.

“I didn’t think we had big power usage, so I didn’t think we were going to be saving so much money,” Mr Flanagan said.

After spending more time at home during 2020, many home owners might be considering a renovation. Maybe it’s time to upgrade the kitchen or finally add that second level.

Whether it’s cosmetic changes or complete structural transformation, there’s a lot to plan, including finding a reputable builder, drawing up plans and most importantly, finding the money to fund it.

What type of renovation is it?

Firstly, you need to see how much equity you have in your home, which refers to the property’s value minus what you owe to the bank. Then determine what renovating you want to do.

According to mortgage broker Will Foster of Foster Finance, there are two types of renovations. “If you’re doing a cosmetic renovation, it’s pretty straightforward if you’ve got the equity in your home already,” he says. “You can borrow up to 80 per of the home’s current value.”

This includes minor work, such as upgrading the kitchen, bathroom or laundry or replacing floorboards. “It’s essentially an equity draw-down, you get up to about $100,000 and you get it all done within two to three weeks,” he says.

The second involves structural work such as adding another level, extending the home or building a granny flat and requires a construction loan.

“For this, you need council-approved plans and the fixed-price building contract all sorted before you get finance approved,” says Foster. “Then the bank controls the flow of funds and pays the builder direct.”

Securing finance before beginning is essential, which is why Foster recommends engaging a mortgage broker early in the process.

“The most common thing we see is people talking to the architect first, who over-quotes by 20 per cent, then the bank won’t come through with the cash,” he says. “Always work out what your borrowing capacity is and that informs the budget.”

Mortgage broker Kathy Dundas from No Fuss Home Loans advises not signing anything until you have at least pre-approval from the lender.

“I’d recommend getting a draft building contract, and making sure the lender is happy with the plans and all draft documents,” she says. “Worse-case scenario is that you sign a contract, you pay the builder a deposit and you can’t get your finance in place.”

Once you’ve got pre-approval, you can finalise the paperwork and get plans council-approved. “When you get the fixed-price builder contract and plans, that’s when you can send the valuer around and they can tick off the equity,” says Foster.

In some cases, your mortgage broker may request a valuation on an as-if-completed basis, which is the property’s value once renovations are done.

“It gives us a lot more equity,” says Dundas. “You might have a property worth $1 million, you spend $200,000 on renovations, but this bumps it up to $1.5 million.”

How to choose a lender

You may choose to stay with your current lender but you don’t have to. “I find that a lot of people are taking advantage of doing a renovation and refinancing at the same time to get better deal from another lender,” says Dundas.

And since mortgage brokers have access to so many lenders, there’s usually one that’s suitable.

“Our process is to select the lender that is going to approve it and tick most of the customer’s objectives, then we look at rates,” says Foster. “There’s no point in getting the cheapest rate if we can’t get the loan approved in the first place.”

One reason for not getting approved is an inability to make repayments. “Banks now abide to responsible lending, which means they look at living expenses, school fees, even how much you spend on your pet,” says Dundas.

How long does it take?

This depends on the lender. “Often lenders with the best deals are the busiest so take a little longer,” says Dundas. “Other lenders are turning things around in two to three days.”

For Foster, it also varies from lender to lender, with some lenders taking up to a month, while others have approved finance in a matter of hours.

Post-pandemic borrowing

Since the pandemic, Foster has seen more people wanting to renovate. “The pandemic put people in their houses for longer periods of time,” he says. “They’re realising how much space they’ve got and what space they need.”

The main challenge post-pandemic is if your income has been affected.

“The lenders essentially want to see that you’ve got enough income to service the loan,” says Foster. “They’ll want your business activity statements to see that your sales are back to post-pandemic levels, or if you’re PAYG-employed, they’ll want a letter from your employer, confirming you’re back on your normal pay.”

HomeBuilder

Those able to qualify for the government’s HomeBuilder scheme could secure an extra $25,000 to renovate. It has specific criteria concerning your income and property, but if the stars align, there might just be a little more in your renovating pocket than expected. It ends on December 31, 2020, so you need to hurry to take advantage.