Financing your renovations

If you’re thinking about renovating your home, you might be considering how you’re going to pay for it. If you need a loan to finance the renovation, there are a few ways you can go about it.

Updated on 16th August, 2019.

To begin with, you’ll need to decide on the scope of your renovation - such as whether you want a structural or non-structural renovation. You will also need to decide whether you’re renovating in order to improve your lifestyle, or in order to sell the home which should affect the scope and cost of your renovation.

Non-structural renovation

Cosmetic changes such as a new coat of paint, or changing the carpet in a room, for example, are considered non-structural. These renovations should not cost an arm and a leg and the general rule of thumb is that renovators not spend any more than 10% of the home’s value on cosmetic upgrades.  

Structural renovation

Consists of a more substantial change to a dwelling such as changing a home’s layout - moving walls, building new ones etc. You may be more likely to undergo this type of renovation if you have bought an older home that is run down or requires changes to its layout in order to make it more livable for your needs. While this type of renovation is likely to cost more, the potential for returns if you sell the house may be higher.

The best way to tackle a structural renovation is to plan. Start by planning your budget, decide how much you can afford to spend and allow for a small buffer in the event that unexpected costs come up - they usually do. You will need to determine whether you’ll be able to pay for your renovation out of your savings, whether you may be able to access any equity in your home or whether you will need a loan to fund the renovation.

Finance options for renovations

There are a number of options available to those looking to finance their renovations.


You may want to consider topping up your home loan by accessing your home equity or redraw facility.

Home equity loan

This loan uses the equity in your property to borrow for a personal purpose. Equity is calculated by subtracting the amount you owe on your mortgage from the market value of your home, which can be determined by a home valuation.


If your current home loan has a redraw facility and you have been making additional repayments on your home loan, you may be able withdraw these funds and use them to fund your renovation.

Construction loan

A loan for the purpose of a new dwelling or major renovation which allows you to draw down funds progressively as your construction invoices come in. It’s a good way to save as you only pay interest on the funds you have drawn on. Download our construction guide for more info

Line of credit

This is a flexible loan arrangement with a specified credit limit to be used at your discretion. This loan type can sometimes be referring to as an equity loan. Interest is charged on the balance owed, rather than the total loan amount.

Personal loan

This could be an option for smaller renovations however it is important to note that personal loans often carry higher interest rates and shorter loan terms.

If you want to learn whether you can access the equity in your home loan or what other finance options are available to you, speak to your local Mortgage Choice broker. They will assess your current financial situation and goals and suggest loan options to satisfy your short and long-term goals.

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Posted in: Renovating