How to finance your renovation

If you make mortgage repayments over and above the minimum required, this money builds up in surplus. If your home loan allows, you could take this money back out – also known as redraw.

Depending on the redraw facility, you could access surplus funds completely online or by submitting an application (minimum redraw amount and fees may apply). It’s also good to keep in mind that once surplus funds are taken out of a home loan, you’ll be paying more in interest.

Learn more about a redraw facility.

You may be able to increase your home loan limit if there’s equity available. You can estimate your equity by working out the difference between your home’s market value and what you owe on your home loan.

By increasing your home loan, you can take advantage of keeping everything in the one place. Make sure you’re comfortable with any changes to your loan repayments before you decide to increase your home loan amount, as well as any potential fees and charges.

Learn more about increasing your home loan.

If you’re in the planning phase and not ready to start your project just yet, then it might be better to review your current home loan and see if you could save instead. It might be a good time to check if you’re getting the most out of your home loan and if there’s an opportunity to refinance. Find out what it means to refinance and the reasons to refinance your mortgage.

Making any structural changes to your home? Before you knock out that wall, you might want to consider applying for a construction loan.

Construction loans work a little differently to regular home loans, as payments from the bank are progressively released to the builder as they complete various stages of the renovation. This helps to monitor the progress of the renovation and means you don’t have to worry about paying the builder directly. You make interest only repayments on your loan until the renovation is finished, which means you could have some extra cash handy during the construction period.

Once the renovation is complete, you can start making repayments on both the principal (loan amount) and interest, or you can continue to pay interest only for a period of up to five years.

Learn more about construction loans.

Depending on the size of your renovation and your savings account, you might not need to borrow a lot of money. With a personal loan, the minimum loan amount is usually lower than the minimum required to apply for a home loan increase or construction loan. There are generally two standard options when it comes to personal loans – secured and unsecured.

A secured loan lets you use an asset (like a car or motorcycle) as security for the loan. It often has a lower interest rate than an unsecured loan.

With no security needed, an unsecured personal loan can be a bit quicker and easier to set up. The minimum loan amount is often lower than secured personal loans and home loans, so if your renovations are only small this could be an option for you.

Learn more about our personal loans.

If you’re only planning to do minor updates to your home (like getting an alarm system or adding a fresh coat of paint) a credit card could be a convenient option for those smaller purchases. It allows you to pay purchases off over time and you could even repay in Easy Instalments.

If you plan to pay the balance of the credit card gradually, then a low rate credit card might suit your situation as it means you pay less interest. If you think you’ll pay the balance off straight away, you might want to consider a card with no annual fee or one that lets you earn points.

Learn more about our credit cards.

If you have a savings stash that you can dip into to finance your renovation, then you could save yourself on interest in the long run. However, there are a few things to consider.

Firstly, is your savings account offsetting your mortgage? If your savings are in an offset account, make sure you calculate the difference in mortgage repayments if you have less money offsetting your home loan.

Also, it can be handy to have an emergency fund for unexpected expenses, like additional renovation costs or a broken down car. It’s good to have money set aside, or a credit card in your pocket just in case.

• Increasing your home loan
• Renovate or relocate?
• Home loan redraw facility explained