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Renovation Refinancing: Refinance Your Home Loan To Renovate

Renovating your home is often a good time to refinance. But you have plenty of other options too.


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Refinancing to renovate means switching to a new mortgage and borrowing extra cash to cover a renovation. Switching to a more competitive mortgage is always a good idea and refinancing can be a smart way to fund your renovation.

This guide will break down the ins and outs of refinancing to renovate and also suggest some other alternatives.

How refinancing to renovate works

  1. Start by looking at your current home loan rate and comparing against other products on the market.
  2. Find a similar mortgage with a lower rate and features that suit your needs, such as an offset account. A loan with low fees will also be cheaper.
  3. Contact the new lender. Be sure to inform them upfront about the extra money you wish to borrow for the renovation. Use a borrowing power calculator to give you a better idea of what you can borrow.
  4. Gather your mortgage documents and apply for the new loan. Try to keep your spending down for the months leading up to the application if you can. This will increase your chances of success.
  5. Once approved, your new lender will help you leave your old lender. You will need to fill out a discharge form.

When should I refinance to fund my renovation?

If you're undertaking a fairly serious renovation then refinancing could help you unlock the necessary cash with a reasonable interest rate. And if you haven't looked at your home loan for a while you may be surprised how high your rate is now. Switching to a lower rate can save you a lot of money.

Renovators who want to refinance should consider these issues:

  • Refinancing requires a new mortgage application and this can take a few weeks. If you need the funds fast you might have trouble.
  • Refinancing can come with exit or switching fees from your old loan (especially if you're on a fixed rate) and fees for the new loan.
  • If you don't have much equity or the value of your property has fallen then refinancing might be hard, or could even cost you lenders mortgage insurance if your LVR rises above 80%.

Others ways to finance a renovation

Depending on the size of your renovation there are other options that might suit you better. Home loan top ups, mortgage redraw or a line of credit can help for smaller renovations that are more cosmetic in nature, with a line of credit offering the most flexibility. For more serious renovations a construction loan is more appropriate.

Home loan top up

You keep your current mortgage but borrow a little extra. This is effective for borrowing smaller amounts but keep in mind that adding to your mortgage means it takes longer to repay and costs more in interest.

You can read more about home loan top ups here.

Redraw on your mortgage

If you've made extra repayments on your mortgage and your mortgage has a redraw facility you could pull that money back out to cover your renovations.

Just keep in mind that redrawing your extra repayments will mean paying more in interest. But if you make extra repayments in the future you can get ahead on your loan again. Learn more about mortgage redraw facilities.

Line of credit

Assuming you've been paying off your mortgage principal for a while you should have built up some equity. A line of credit loan allows you to borrow some of this equity and spend it as needed.

You could fund your renovation this way and you only pay interest on the equity you use.

Construction loans

If your renovations get very serious and require structural changes to walls, foundations or wiring you may need to take out a construction loan. That's why it's important to plan your renovations carefully and let your lender know what you intend to do so there is no confusion.

Structural renovations include:

  • Altered or replaced foundations
  • Removal of exterior or interior supporting walls
  • New or replaced electrical wiring
  • New or replaced major plumbing.

Learn more about mortgage options for renovations here

Tips for refinancing to renovate

  • Work out how much equity you have by getting a valuation done and find out the maximum Loan To Value (LVR) required for your home loan
  • Your LVR will help you determine how much money you have available to draw on
  • Set a benchmark for value: research what the media house/unit price is in your area and look at properties recently sold in your area
  • Rule of thumb: don't spend more than 10% of the median property value on renovations. Though this would depend on the conditions of the property
  • Work out how much you're eligible to borrow, use this calculator
  • And this calculator to help you figure out the cost of mortgage repayments

Compare competitive refinance home loans

Data indicated here is updated regularly
% 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)
$0 p.a.
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
$0 p.a.
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
$8 monthly ($96 p.a.)
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply. Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
$0 p.a.
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
$0 p.a.
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% (<$500k Owner Occupier, P&I)
$10 monthly ($120 p.a.)
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.

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Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

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2 Responses

  1. Default Gravatar
    GraceSeptember 6, 2017

    What type of loan suits me?
    I own my own home $380,000.
    Im wanting to buy land $200,000 max & build smaller home $180,00.
    I have $20,000 in savings But on a disability pension.
    Only $400 a month to spare.
    Can u recommend an loan approach?
    Can i use current home equity &,
    $20,000 to cover insurances & monthly repayments during construction,
    And sell current home during last 10 weeks of construction?
    Would this approach help qualify me for a land purchase & construction?

    Thank you

    • Default Gravatar
      DanielleSeptember 7, 2017

      Hi Grace,

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      I won’t be able to say which would be the best option for you, but you are on the right page. You may review and compare the offers available on the table. Once you have selected one, you may proceed by clicking the green “Go to Site” button. You may also refer to this page to find out more about getting a loan on a disability pension or by using your home equity. You may also seek the advice of mortgage expert through here.

      I hope this helps.


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