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Funding your home renovation

21.02.23 | Marc Barlow | Blog

Whether you’re renovating to stay or to sell, it’s a great way to update your home. Renovations can be exhausting and disruptive, but they can also dramatically increase the value of your property.

But, of course, renovations are expensive. So here are some top tips for paying for your renovation.

Plan ahead of time

What’s considered a “minor renovation” by one person may be a major architectural remodel by another. Expanding the living room, landscaping the garden, and knocking down a few internal walls are much more expensive than simple cosmetic touch-ups and new appliances.

It’s crucial to get several quotes. Make a list of the necessities and luxuries you desire. And if the budget is running over, be willing to make changes.

Most importantly, don’t over-capitalise on your property – even if you’re planning to stay. Avoid spending more if it won’t increase the property’s value by at least as much. You don’t necessarily want to be the most valuable property in your area (unless you adore the lush life).


Home equity loans

A home equity loan entails taking out a loan using the current market value of your house. When people wish to renovate, this is the method they most frequently use to borrow money.

Your present home loan balance and any increase in your property’s value since you bought it are the two main variables that will affect how much you can borrow.

For instance, if you had an $800,000 loan ten years ago, you might still owe $500,000 on it. However, your home may suddenly be worth $1 million. Your equity is the difference between your loan balance and the value of your home ($500,000 in this scenario).

In this case, you may be able to borrow $300,000. Lenders are unlikely to lend the entire sum of your equity, usually capping the maximum loan to 80% of the property value. It’s a good idea to shop around and even consider refinancing to access more of your equity.


Refinancing your loan

Speaking of refinancing, this effectively entails paying off your current debt and setting up a new loan, possibly with a new lender. This may be a viable alternative if you intend to remodel or completely overhaul your property because you can stretch the cost out over the duration of the loan.

Refinancing is yet another common choice for individuals who have owned their property for several years, because home-loan interest rates are usually lower than those on personal loans or credit cards.

Read more about the pros and cons of refinancing your loan.



A redrew facility is especially common with variable-rate mortgages, making it easy to access your money.

You might be able to use your own money if you’ve been paying down your debt for several years and have been making extra repayments on top of the required minimum.

Remember that some lenders have restrictions on how often or how much you can redraw at once, and that doing so will likely result in an increase in your regular loan repayments.

Read more about how using redraw can save you money.


Personal loans

While personal loan interest rates are typically higher than home loan interest rates, they may be appropriate for minor renovations on a new home purchase, or a quick cosmetic make-over prior to selling.

If you can afford the repayments, borrowing up to $50,000 in this manner may make the renovation possible.


Lines of credit

A line of credit is a pre-approved amount of money that you can access when you need it. It is commonly used for ongoing or long-term renovations. You only pay interest on the funds you borrow, and as you pay off your balance, you can reborrow the unused funds without having to reapply.


Credit cards

This option is only worth considering if you want to do very minor renovations. The interest rates are typically much higher than those found on mortgages and even personal loans, but for a small project, the extra interest may be less than the loan establishment fees. Always make every effort to pay off credit card debt as soon as possible.


Contact us today

If you’re thinking about renovating, contact us at Mortgage Broker Group. We can assist you in understanding your existing equity and the implications of extending a loan, refinancing, accessing redraw, and establishing a line of credit. Our advice comes at no cost to you – ever.

We can also investigate lower-cost ways to secure a reno loan for our existing clients, aiming to avoid personal loans and credit card use.

Make that renovation a priority. Contact Mortgage Broker Group today.