Can You Get A Loan For Renovations?

One of the many wonderful parts about owning your home is that you can tailor your property to suit your taste and lifestyle through renovation. When done well, a renovation can potentially add a lot of value to your existing property, not to mention improve your lifestyle. So, how can you get a loan for renovations?

While renovations are a desirable way to add value to a home, they are not inexpensive. With construction costs and material prices rising across Australia, according to ABS data in 2023, construction input prices rose 10% year-on-year; many homeowners need to explore financing options. 

There are many different ways to finance your renovation, from extending your existing home loan to applying for a personal or construction loan. The right option for you will depend on your financial situation, renovation costs, and equity in your property.

Let’s look at how you can turn your renovation dreams into a reality!

 

Pay your way through savings, redraw, or offset

You don’t need to turn to credit when considering a home makeover. You may already have a savings account, or funds accrued in your offset account or redraw facility inside your existing home loan. 

This may be a good option if you are keen to avoid taking on extra debt. It is much simpler than adding an additional loan to your responsibilities, and you can avoid the extra stress, monthly payments, interest and overall financial risk.

If you use your savings, ensure you have enough left over for emergencies and other unexpected expenses such as car repairs or insurance excesses. Often, draining your savings dry can be as financially risky as taking on another loan, so keep your savings in check and topped up along the way.

If you choose to access the money in your offset or redraw account, speak to your mortgage broker or lender to find out how the life of your loan may be affected. Any money saved in your offset account reduces your interest payable on your home loan and even the life of your loan term, so get the right advice to ensure this is the best option for your situation.

Be aware that withdrawing funds from your offset or redraw could increase your overall interest costs if those funds would otherwise reduce your loan balance. It’s essential to weigh up whether using those funds now could lead to higher repayments or a longer loan term.

Need advice? Get in touch for an obligation-free discussion about your renovation dreams, call 02 4018 7505.

 

Refinance your home loan to access equity

You may have a decent amount of equity built up in your home. If this is the case, consider refinancing to fund your renovation. Your equity in your home is the difference between how much your home is worth on the market and how much you currently owe on your home loan. You can borrow additional funds against this equity to complete your renovation. 

During this time, you can negotiate your current home loan or find another lender with a better deal or loan product.

Many lenders allow you to access up to 80% of your property value, minus your existing loan balance. If your home is worth $800,000 and you owe $500,000, you can borrow up to $140,000 in extra funds. This is subject to credit approval, your financial situation, and the lender’s policies.

Be aware when refinancing that fees may be applied and that the life of your loan may be extended. This could include early repayment fees, particularly if you are still within a fixed-rate period.

When refinancing, you may consider placing your renovation funds in a 100% offset account if possible. In doing this, you can avoid paying interest on the extra amount until you need to use it. You could also consider a line of credit home loan, which allows you to draw on the funds as required. Interest is typically only charged on the amount used, not the full approved limit.

“I have experienced this process and need to leverage of the value of the home to improve its value. We accessed available to do bathroom and kitchen renovations. We are so glad we did as we enjoyed the new additions to the home and the benefit of improving the value of the property for the future. I would be glad to assist you if you’re looking to do more with your home”. Nestor Ramirez, Senior Mortgage Broker.

Construction loans for major renovations

Your renovation may be a big one, involving a knockdown and rebuild, a second storey, or a significant extension. In these cases, a construction loan might be the most suitable option. This type of loan is typically assessed based on the projected post-renovation property value, and funds are released in stages known as progress payments as work is completed.

A construction loan may be interest-only during the building phase, transitioning to principal and interest repayments once the renovation is complete. You can either apply for a construction loan alongside your existing loan or refinance your current mortgage to convert it into a construction loan.

Construction loans require detailed plans, builder quotes, and permits upfront, so be prepared for a more involved approval process. However, they offer a structured way to borrow money for renovation while maintaining control over your cash flow.

Smaller renovations? Consider a personal loan

Perhaps your renovation is smaller in scale and cost—think fresh coat of paint, new flooring, or modernising fixtures. A personal loan may be the quickest option. These loans generally allow you to borrow up to $50,000–$75,000 and come in two types: secured and unsecured.

A secured loan (backed by an asset such as your car) typically offers a lower interest rate than unsecured loans. However, even the lowest rates on personal loans are often higher than variable-rate or fixed-rate loans secured against your property. That said, personal loans can be paid off over shorter timeframes, and they don’t affect your mortgage or require you to access equity.

How to calculate your equity before you renovate

Before borrowing money to renovate, it’s helpful to understand your current equity. Start by getting a valuation or estimate of your home’s current market value. Then subtract your current loan balance.

For example:

• Home value: $900,000
• Remaining loan: $520,000
• Equity: $380,000
• Borrowable equity (80% cap): $200,000 (80% of $900,000 is $720,000, minus your $520,000 loan)

This gives you a sense of the maximum loan amount you might be able to access through refinancing or a supplementary loan. Keep in mind, this does not guarantee approval—lenders will also assess your income, credit history, and ability to make home loan repayments.

Talk to a mortgage broker before you borrow

With so many ways to finance your renovation, knowing which loan type is right for you can be hard. Should you refinance your owner-occupied home loan? Use a low-rate credit card for a minor update? Or apply for a construction loan for that dream extension?

At Watson Mortgages, we offer tailored advice on financing your renovation in a way that suits your goals, timeline, and financial situation. We work with over 20 lenders and have experience finding financing options for all projects, from minor renovations to complete knockdown rebuilds.

Best of all, our advice is complimentary. We don’t charge you for our time—the lender pays us once your loan is settled.

We’ll provide an obligation-free consultation and help realise the potential for your future home. Whether you’re extending your kitchen, building an outdoor deck or taking on a major home renovation, we’ll help you find the best loan for renovations based on your goals and situation.

Call our office on 02 4018 7505 or book online to start exploring your options today.

^Disclaimer:

Watson Mortgages Pty Ltd (Nestor Ramirez Credit Representative Number 378816) is authorised under Australian Credit Licence 389328.

Watson Mortgages Pty Ltd ABN 29 642 538 967 is a separate entity to Elliot Watson Financial Planning Pty Ltd. Elliot Watson Financial Planning Pty Ltd is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

This page provides general information only and has been prepared without taking into account your own objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply. Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.