Mortgage options to fund your renovation

List of materialsPlanning a home reno? There are several mortgage types you can use to fund the costs.

Renovations can make a good home great and add serious value to your property. If you're planning to renovate your home there are several mortgage products you can use to cover the costs. You can take out a separate mortgage, unlock equity from your home or top up your home loan.

It's worth comparing these options and finding the one that works best for you.

Line of credit loan

A line of credit loan uses the equity in your home to extend you a credit limit that can be used for any purpose. Equity is the difference between what you owe on your home and its current value. For instance, if you owe $500,000 on your home loan and your home is valued at $750,000, you've built up $250,000 in equity.

A line of credit loan allows you to tap into this equity. Your lender will offer you a credit limit based on your equity, and you can use as much or as little as you like.

  • Benefits

A line of credit loan can be great to use for renovations because it offers you flexibility. You can use as much or as little of your credit limit as you need. You'll only be charged interest on the amount you've actually used for your renovation project.

  • Drawbacks

One of the main drawbacks of a line of credit loan is that these products usually come with a higher interest rate than standard home loans. It can also be difficult to manage a line of credit home loan. You'll have to budget well to make sure you keep your project within your credit limit, and to only use the amount of credit you intend.

Rates last updated December 15th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
State Custodians Low Rate LOC - LVR up to 80% (Owner Occupier, IO)
3.15%
3.16%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
AMP Professional Package Line of Credit - $750,000 and above (Owner Occupier, IO)
3.74%
$0
$349 p.a.
80%
Low fee line of credit loan with package benefits.
Aussie Select Line of Credit - (LVR 80.01% to 90%) (Owner Occupier)
3.94%
$0
$15 monthly ($180 p.a.)
90%
A low rate line of credit with low ongoing fee.
State Custodians Low Rate LOC - LVR up to 70% (Owner Occupier, IO)
3.08%
3.10%
$0
$0 p.a.
70%
Withdraw up to 70% of your home equity with this competitive line of credit loan.
P&N Bank Equity Access Home Loan
5.12%
$395
$10 monthly ($120 p.a.)
90%
A home loan which gives flexible access to your equity.

Compare up to 4 providers

Construction loan

A construction loan is a specialty mortgage that pays a builder throughout the construction process. These loans are structured differently than traditional mortgages. Rather than paying out a sum of money all at once, these loans pay in instalments known as progress draws.

  • Benefits

Construction loans can be a good option if you're undertaking substantial renovations that require a significant amount of structural work. You can borrow for a construction loan based upon the final post-renovation value of your home.

Construction loans also give you the option to pay only the interest portion of your loan until after construction is complete.

  • Drawbacks

Getting approved for a construction loan can be a bit more complicated than a traditional home loan. You'll need a builder to draw up plans to provide to your lender. If your renovation project is smaller, a construction loan probably isn't the right choice.

Rates last updated December 15th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Adelaide Bank SmartFix Home Loan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.91%
3.25%
$375
$15 monthly ($180 p.a.)
95%
A three year fixed rate loan with 100% offset account.
AMP Construction Loan - Owner Occupier (IO)
5.95%
5.27%
$350
$10 monthly ($120 p.a.)
80%
Build a home or investment property and take advantage of interest-only repayment options.
Adelaide Bank SmartFix Home Loan - 2 Year Fixed Rate (Owner Occupier, P&I)
2.89%
3.26%
$375
$15 monthly ($180 p.a.)
95%
Take advantage of a locked rate for two years and a full offset account.
Aussie Activate Full Doc Home Loan - >80% up to 85% LVR Construction Standard Rate
4.86%
5.05%
$0
$0 p.a.
85%

Compare up to 4 providers

Home loan top-up

A home loan top-up is another way to tap into the equity in your home. When you refinance your home loan you can draw out cash from the equity you've built up. Your lender will re-value your home as part of the refinancing process, and may offer you a larger home loan amount based on the new value.

You can draw out cash from your loan. The maximum amount you can withdraw is the difference between the new home loan amount and the amount you owe.

  • Benefits

A home loan top-up is a fairly simple process, and could be an easy way to finance your renovation. You won't have to apply for an entirely new loan, and will only have a single home loan and repayment to worry about. If you've built up a lot of equity, you could be able to draw out a significant cash amount.

  • Drawbacks

If you top up your home loan, you'll be adding to your original debt. This means it could take you longer to pay off your home loan and that you'll pay more interest in the long run. Also, your repayments will rise. You'll need to budget to make sure you can afford your new repayment amount.

Rates last updated December 15th, 2019
$
% p.a.
Offset account
Split account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.99%
3.01%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Online only cashback offer: Refinancers borrowing $250,000 or more can get a $4,000 cashback for their first application (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. Application fee waived for loans above $150,000.

UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
2.84%
2.84%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
loans.com.au Smart Home Loan - (Owner Occupier, P&I)
2.88%
2.90%
$0
$0 p.a.
80%
Get one of the lowest variable interest rates on the market and pay 0 application or ongoing fees.
Virgin Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.79%
3.30%
$0
$10 monthly ($120 p.a.)
80%
Buy your home and lock in a low rate for the first two years. Available with a 10% deposit.
State Custodians Low Rate Home Loan with Offset - LVR up to 70% (Investor, P&I)
3.08%
3.10%
$0
$0 p.a.
70%
A competitive rate with no application or ongoing fee.

Compare up to 4 providers

Use a personal loan

If none of the above options work for you then maybe a personal loan is the way to go. A personal loan can be either secured or unsecured. This means it can either be secured by an asset, such as a vehicle, which the lender can take possession of in the event of default, or it can be tied to no assets at all.

Personal loans can be a good option if your renovation is small and won't require a significant expenditure.

  • Benefits

Personal loans are often processed quickly, so you could have the funds in your account shortly after applying. If you're borrowing a small amount, they can be a fast, convenient way to fund your renovation.

  • Drawbacks

Personal loans often carry very high interest rates. While secured loans have much lower rates than unsecured loans, they typically have higher rates than mortgage products. Rates can vary significantly from one lender to the next, so it's crucial to compare your options.

Learn more about personal loans for home renovations

Image: Shutterstock

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