If you have funds available in a redraw or offset account, you can readily access these funds
to cover the costs of the renovation. Remember that this will lead to an increase in interest
paid over the duration of the loan, so factor that in for consideration.
Use the Equity In Your Home / Home Loan Top Up
If your home has increased in value and/or you’ve been diligent in reducing the outstanding balance of your loan, you may have built reasonable equity in your home.
You can borrow against this equity to carry out the renovations. If you are planning on major renovations or improvements, you might also be able to borrow against the improved value of your property on completion (see below Building & Construction Loan). It’s important to note that this will mean an increase in your repayments, so you’ll need to make sure your budget covers the increased payments. It may also mean that it takes longer to pay off your home loan.
Refinancing can free up equity and give you greater cashflow for your renovations.
For substantial renovations, it might be worth looking into a Building and Construction
Loan specifically for the project. These loans allow you to receive the funds in instalments,
meaning you only pay interest on the money you have spent.
It can be more complicated to access a Building and Construction Loan, with many
lenders requiring plans and a contract with a registered builder. These are best suited to large-scale
Line of Credit
A line of credit is an ongoing loan facility that you can access whenever needed, up to a pre-determined limit. You only pay interest on the amount outstanding so repayments will vary depending on loan balance. This product is usually available at a higher interest rate & does not require a compulsory minimal principal reducing payment so be mindful of these points.
For smaller renovation projects, a personal loan can provide funds quickly. Of course, interest rates on personal loans are generally higher, and the maximum term is seven years.
Government Stimulus Package
In 2020 the Federal Government announced a $25,000 grant to renovate an existing home
or build a new home. This grant is available to those who sign a building contract before the 31st
There are a number of criteria, including that the renovation cost is between $150K and $750K.
Income caps apply and the renovation should start within 3 months of signing the building contract.
You can find more information at the Federal Government website.
A golden rule is that renovations should increase the value of your home by at least the same,
if not more than they cost to carry out.