How to Finance a Home Renovation

How to Finance a Home Renovation

Australia’s home improvement market is worth a whopping $43 billion per year with more homeowners than ever wanting to renovate their homes. 

Whether it’s to make home life more comfortable, increase your home’s equity or turn a profit, taking out a loan to finance a renovation is a popular option we see people accessing. 

The government’s HomeBuilder scheme can also provide a grant of $25,000 to eligible renovators if the renovation is worth between $150,000 and $75000, but contracts must be signed and building started before the end of 2020. 

When it comes to financing, there are multiple options available: 

Use your own savings

You may choose to use the savings you have to improve your home. This might be with the cash you’ve saved up or money that has built up in your offset or redraw facility of your current loan that you can access without incurring debt. 

Just remember that taking money from your offset will increase the amount of interest you’re charged and may increase the time of your loan from what you would have saved by it being in there in the first place.

Using your own savings allows you to enjoy the renovation more without worrying about paying any extra loans back. But we understand having this amount of savings on hand can be hard to come by, so there are plenty more options. 


If you have enough equity in your home, refinancing your current home loan could be an advantageous option. This essentially means you can leverage the equity in your home to top up your loan and fund the renovation. 

Equity is the difference between the value of your home and how much you owe. Refinancing may also give you the ability to take advantage of securing a lower interest rate, so speak to your mortgage broker about what home loans are available to you. 

If you’re approved for your top up the money will be placed in your offset account ready for you to access when you need it for your renovation. 

Construction loan

If you do not have enough equity in your home, a construction loan might work for you. It’s similar to refinancing in a way, except the amount loaned is based on the final value of your property post-renovation. 

During the duration of your construction loan, lenders will release money as you need it to pay for your builder’s invoices and will often pay them directly. They are usually paid in stages, which is set out in the initial building contract. 

Construction loans have interest-only payments during the construction period, meaning your repayments are lower throughout this time.  

Personal loans 

A personal loan might suit a smaller sized renovation. Personal loans often have lower interest rates than credit cards, so consider this as an option before maxing out your credit cards. 

The benefit of a personal loan is that you won’t have to use your home as collateral, but this wouldn’t be beneficial for large scale projects. 

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