How to finance home renovations

1 minute read

How to finance home renovations

by Luke Heavey 10 November 2020 1 minute read

The pandemic has meant that many of us are spending more time at home than ever before. It’s little wonder Domain has reported that Australians are investing in home improvements and renovations at a record rate, writes Luke Heavey.

How to finance home renovations
November 10, 2020

Most of us won’t be able to fund the full cost of a renovation through savings alone. So, what are your options when it comes to financing a home renovation? Luke looks at the options.

Whether you’re looking to add a swimming pool to achieve a better lifestyle, create more space by adding extra bedrooms, or upgrade your kitchen or bathrooms to improve liveability, you’re far from alone.

Why renovate?

Renovating gives you more control over the layout and look of your home and usually at a lower cost than buying a new home. You avoid transaction costs like stamp duty, higher mortgage repayments and the burden of needing to move.

Renovating will also increase the value of your home when it comes time to sell and build equity, which you can use to invest in another property.


A renovation will also often bring more enjoyment to your daily life and improve your lifestyle.

Most of us won’t be able to fund the full cost of a renovation through savings alone. So, what are your options when it comes to financing a home renovation?

Construction loan

For any building works which require structural changes, such as adding a bedroom, you may be eligible for a construction loan. The benefit of a construction loan is that the bank will release progress payments to the builder as you move through agreed milestones of construction, so you don’t need to pay interest on the full amount all at once.

Personal loan

A personal loan will generally be simpler to apply for as there are less criteria required for approval and you will have flexibility on how you spend the funds. The trade off, however, is that the interest rate will generally be significantly higher as it’s an unsecured loan. This may be a suitable option for smaller expenses, which can be paid back relatively quickly, such as carpeting or painting.

Redraw from your home loan

If you have a redraw option available on your home loan, you may be able to redraw the funds. If you’ve been paying extra into your home loan, a redraw facility lets you access those extra repayments to spend elsewhere. Talk to your bank or mortgage broker to find out if you have this facility. Keep in mind that the lender will have to approve the redraw and you will usually be subject to a redraw fee.

Access equity

If your home has increased in value over time, you may have equity in your home. Any increase in value minus what you owe on the home loan is considered equity. Most banks will allow you to access your equity to fund renovations. Speak to your bank or mortgage broker to see how much equity you have available in your property.


Refinancing can free up the cash flow required to fund a renovation by reducing your repayments. Your mortgage broker can recommend whether you should change your loan structure or lender to reduce your financial burden.

Before you decide to proceed with a renovation project, it’s best to talk to your broker about how you can access the necessary funds while making the process as cost-effective as possible.

By Luke Heavey, senior finance consultant at Orium Finance

How to finance home renovations
How to finance home renovations
spi logo

About the author

Emma Ryan

Emma Ryan

Emma Ryan is the deputy head of content at Momentum Media.

Emma has worked for Momentum Media since 2015, and has since been responsible for breaking some of the biggest stories in corporate Australia, including across the legal, mortgages, real estate and wealth industries. In addition, Emma has launched several additional sub-brands and events, driven by a passion to deliver quality and timely content to audiences through multiple platforms.

Email Emma on: [email protected]Read more

From the web

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.