Financing your renovations

When it comes to funding your next renovation project, the good news is that there may be a few ways you can go about it without dipping into precious cash savings.

Article updated 04 May 2021

Right now, a whopping 41% of Aussies are looking to upsize their house rather than buy new property1. With property prices increasing around the nation2, it could be a great time to add value and make upgrades to your home without the risk of overcapitalising.

When it comes to funding your next renovation project, the good news is that there may be a few ways you can go about it without dipping into precious cash savings.

Consider the type of renovation

When it comes to finances, a good place to begin is to work out what your renovation will cost and how you intend to fund the project. Consider whether the renovation is a structural or non-structural renovation. 

Non-structural or 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.  

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.

Depending on the size of your project, you may want to consider alternatives to dipping into the savings.

6 finance options for renovations

Here are a few options that may be 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.

How do construction loans work?

If you're thinking about building or substantially renovating your home, you may need a construction loan.

In this video, Emma explains how constructions loans work and what makes them different from other types of home loans.

Watch our video to see if a construction loan is suitable for you.


Building your home guide

Building a brand new home or completing major renovations on an existing property are some of the most exciting projects we can undertake as home owners.

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Line of credit

This is a flexible loan arrangement with a specified credit limit to be used at your discretion. This loan type is sometimes referred 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.

Expert advice could make all the difference when it comes to financing your next renovation project

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