Renovation Refinancing: Refinance Your Home Loan To Renovate

Rates and Fees verified correct on December 5th, 2016

buildingBe the 27% of homeowners that refinance their mortgage properly for renovation

Almost three in four (73%) of homeowners think it would be challenging to refinance their home loan to renovate their home according to a survey of more than 1,000 homeowners commissioned by finder.com.au.

If you're looking to begin renovating a property, it's important that you read on to find out the basics of how to do it. Not only will we show you how to refinance to fuel your renovations, we'll also compare some of the lowest mortgage interest rates on the market to get you started.

Refinancing to renovate is the most popular reason for refinancing according the Mortgage and Finance Association of Australia (MFAA) and can be a great way to add value to your property. Typically there are really only two choices to make when you refinance to renovate. They are a line of credit loan or a construction loan.

Flowchart showing the process of refinancing to renovate

What are line of credit home loans?

A line of credit home loan, also known as an equity loan, allows borrowers to draw on the equity they have in their property. A common credit limit on these home loans is 80% of your Loan-to-Value Ratio (LVR). To calculate your maximum borrowing, subtract your current loan balance from your property value and then multiply this figure by 80%.

Line of credit loans can obviously only be used in situations where there is an available amount of equity to use. When a line of credit is approved, it is like a giant credit card attached to your home loan with an upper limit of your equity amount. It can be drawn on for any type of expense you like including investments, cars and of course, cosmetic renovations. Interest-only starts accumulating when equity is drawn down.

There is a huge amount of freedom with a line of credit home loan. This means they are suited to people who are disciplined financially as spending money on frivolous purchases could be tempting to some.

Line of credit home loan comparison

Rates last updated December 5th, 2016.

NAB Portfolio Facility (LOC) - $500,000 to $999,999

Interest rate decreased by 0.10%

August 19th, 2016

NAB Portfolio Facility (LOC) - $250,000 to $499,999

Interest rate decreased by 0.11%

August 19th, 2016

View latest updates

Jodie Humphries Jodie
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
NAB Portfolio Facility (LOC) - $500,000 to $999,999
Pay no application fee and enjoy a low interest rate.
5.01% $0 $550 p.a. 90% Go to site More info
4.84% $0 $395 p.a. 90% More info
Westpac Equity Access
Access a line of credit home loan through Westpac.
5.65% $600 $10 monthly ($120 p.a.) 95% More info
NAB Portfolio Facility (LOC) - $250,000 to $499,999
A line of credit home loan with no application fee.
5.11% $0 $550 p.a. 90% Go to site More info
Bankwest Complete Home Loan Package Equity - $500k to $750k
All the benefits of Bankwest's Complete Package Home Loan with a line of credit.
4.42% $0 $395 p.a. 90% More info
Commonwealth Wealth Package Line of Credit - $350,000 to $749,999
Enjoy the package benefits of Commonwealth Bank's Wealth Package with the flexibility of a line of credit.
5.03% $0 $395 p.a. 97% More info
Heritage Bank Living Equity Line of Credit - Owner Occupier
A competitive line of credit loan from Heritage Bank.
5.11% $600 $8 monthly ($96 p.a.) 85% More info
Suncorp Home Package Plus Access Equity - $150K & $499,999 (LVR 80% to 90%)
Enjoy a discounted rate on your equity loan and fee discounts.
5.32% $0 $375 p.a. 90% More info
Aussie Optimizer Line of Credit Home Loan - $750k+ LVR <= 80% (Owner Occupier)
A competitive rate with no application fee and borrow up tp 95% LVR.
4.04% $0 $198 p.a. 80% More info
Commonwealth Bank Viridian Line of Credit - Variable
A flexible line of credit with low minimum loan amount.
5.63% $600 $12 monthly ($144 p.a.) 80% More info
ANZ Equity Manager
A low interest rate home loan with a low ongoing fee.
5.67% $600 $150 p.a. 90% More info
St.George Portfolio Home Loan With Advantage Package - $150K to $249k (Special Discount)
Low rate line of credit loan with flexible repayment options.
5.04% $0 $395 p.a. 90% More info
AMP Professional Package Line of Credit - $250,000 to $749,999 (Owner Occupier)
Use the equity in your home to make your next investment move for your future.
4.09% $0 $349 p.a. 90% More info
Suncorp Access Equity Line of Credit
Consolidate your debt and build wealth with this line of credit loan.
5.87% $600 $10 monthly ($120 p.a.) 90% More info
Homeloans Ultra Line of Credit
A line of credit home loan with no application fee aor ongoing fee and borrow up to 90% LVR with redraw facility.
4.54% 4.58% $0 $0 p.a. 90% More info
Citibank Mortgage Plus Standard Variable Rate - ≥ $500,000 LVR 80.01% to 90% (with LMI) Owner Occupier
A great variable interest rate option also available as an ongoing Line of Credit.
4.27% 4.63% $0 $350 p.a. 90% More info
Macquarie Bank Line of Credit Home Loan Package - Owner Occupier
Access your equity for renovations or other needs with this line of credit home loan package.
4.09% $0 $398 p.a. 95% More info
Aussie Optimizer Line of Credit Home Loan - <$750k LVR <= 80% (Owner Occupier)
A competitive rate with no application fee and borrow up tp 95% LVR.
4.09% $0 $198 p.a. 80% More info
Macquarie Bank Line of Credit Flyer Home Loan Package - Owner Occupier
A flexible home loan package which guarantees access to equity easily and offers the ability to earn Qantas points.
4.14% $0 $398 p.a. 95% More info

What are construction home loans?

Construction loans are loans specifically suited to the purpose of building a property. Construction loans are particularly useful as the total borrowing amount is not based on the property's current value, but on a predicted value at completion. Borrowers therefore have access to vast sums.

To qualify for a construction loan, council-approved building plans and a fixed-price building contract must be in place.

Your lender will appoint an independent valuer who will assess your builder's work at each construction stage before the lender pays an installment. The beauty of this is that you have extra help on your side to force your builder to complete work at a high standard. In addition, interest-only accumulates on money drawn down — which is good for your back pocket.

Once construction is complete, borrowers can often refinance to the loan of their choice, or roll the loan over to the lenders' standard variable interest home loan.

Compare construction loans

Rates last updated December 5th, 2016.

loans.com.au Construction - Variable (Owner Occupier)

Interest rate increased by 0.06%

December 21st, 2015

NAB Flexiplus Mortgage - Standard

Interest rate decreased by 0.10%

August 19th, 2016

ClickLoans The Online Construction Loan - Variable

Comparative rate decreased by 0.20% | Interest rate decreased by 0.05%

September 7th, 2016

View latest updates

Jodie Humphries Jodie
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
ClickLoans The Online Construction Loan - Variable
A loan built for the construction of a new home with a fee-free redraw and can be used for investment purposes.
4.02% 4.02% $0 $0 p.a. 80% Go to site More info
NAB Flexiplus Mortgage - Standard
A flexible home loan with 100% offset facility which will allow you to deposit salary and other earnings into the account to help save on interest.
5.69% $0 $250 p.a. 90% Go to site More info
NAB Tailored Home Loan - Owner Occupier (P&I)
You can link your home loan to a deposit or transaction account and get 100% offset to help reduce the interest rate on the loan
5.25% 5.38% $600 $8 monthly ($96 p.a.) 95% Go to site More info
Westpac Rocket Repay Home Loan - Principal and Interest
The Westpac Rocket Repay Home Loan lets borrowers to own their home sooner with a 100% offset to save on interest.
5.29% 5.43% $600 $8 p.a. 95% More info
loans.com.au Construction - Variable (Owner Occupier)
A construction loan offer with a variable interest rate and interest only terms, loans.com.au is an award winning home loan lender.
4.21% 4.11% $0 $0 p.a. 90% More info
Australian Military Bank Construction Loan
Build or renovate your dream house and borrow up to 95% of your property's value. $2,000 travel voucher available when you take out a DHOAS home loan of $250,000 or more before 31 January, 2017. Other terms and conditions apply.
4.19% 4.27% $500 $0 p.a. 95% More info
Pacific Mortgage Group Construction Home Loan - Owner Occupier
A competitive variable rate construction loan to meet the needs of customers with unlimited redraws, no monthly or annual fees and flexible repayments.
3.60% 3.60% $0 $0 p.a. 95% More info
Central Murray Credit Union Construction Loan - Variable
A competitive variable interest rate construction loan that offers a loan size of up to $750,000.
5.50% 5.56% $0 $0 p.a. 95% More info
First Option Credit Union Construction Loan
A competitive construction loan with a low interest rate and no monthly account keeping fees.
4.99% 5.07% $1,257 $0 p.a. 95% More info
St.George Portfolio Home Loan With Advantage Package - $500k to $749k (Special Discount)
An equity loan with the flexibility to pay your loan off at a frequency which suits you.
4.79% $0 $395 p.a. 90% More info
The Mac Construction Home Loan
A construction loan designed for customers who want to renovate or build a new home. It offers $0 annual, ongoing or exit fees.
5.09% 5.17% $300 $0 p.a. 95% More info
AMP Construction Loan - Owner Occupier
Build a home or investment property and take advantage of interest only options with this loan.
5.43% 5.61% $350 $10 monthly ($120 p.a.) 90% More info
Homestar Construction Home Loan - (Owner Occupier)
Build or renovate your home with features that include online account management, flexible repayment options and more!
3.98% 4.10% $495 $0 p.a. 90% More info
Austral Mortgage AdvantagePlus Construction Loan
A competitive variable interest rate loan that offers 100% offset and 95% max insured LVR.
4.94% 5.05% $440 $0 p.a. 95% More info
Freedom Lend Construction Loan - Owner Occupier
A construction loan ideal for building or renovating your home that offers 100% offset, flexible repayments and up to 90% LVR.
3.79% 3.79% $600 $0 p.a. 90% More info
St.George Portfolio Home Loan With Advantage Package - $250K to $499K (Special Discount)
Enjoy the flexibility of an equity loan when building your home.
4.84% $0 $395 p.a. 90% More info
Homestar Construction Home Loan - (Investor)
Build or renovate your investment property with this loan that includes online account management, flexible repayment options and more!
4.33% 4.45% $495 $0 p.a. 85% More info
Family First Credit Union Construction Home Loan
A competitive variable rate loan ideal for building or renovating your home with flexible repayment options.
4.85% 4.92% $175 $0 p.a. 90% More info
Gateway Credit Union Construction Loan
A competitive variable rate construction loan that allows borrowers to borrow up to 95% of your property value and borrow from a minimum of $50,000.
4.84% 4.90% $200 $0 p.a. 95% More info
La Trobe Construction
This construction loan is ideal for Pay As You Go (PAYG) or self-employed borrowers who wants to build or renovate their home.
7.19% 7.85% 1.25% of the loan amount $0 p.a. 75% More info

How do I choose between the two?

Line of credit loans can only be used for cosmetic renovations, while construction loans can only be used for structural renovations. Therefore, you need to think carefully about the type of renovations you are making and whether the scope of the renovations will creep into structural changes from the initial plans.

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What loan is best for cosmetic renovations?

A line of credit loan is generally suitable for renovations to change aesthetics. This includes renovations which only tidy up a property's appearance, rather than alter the structure, are considered cosmetic.

Cosmetic renovation examples include:

  • Installing a new kitchen, bathroom & flooring
  • Giving the interior or exterior walls a lick of paint.

What loan is best for structural renovations?

Construction loans are generally suitable for structural renovations. Structural renovations are major endeavours that involve council-approved building plans and a licenced builder working in a fixed-price building contract arrangement. These are time-intensive projects that involve a level of expertise and certification above your average DIY renovator.

Structural renovations include:

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

It is important to keep in mind when planning your renovations, what you are planning to do. Remember to do your due diligence and research all options available to you. For more information, leave a comment and we'll endeavour to help you.

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What will a renovation job cost me?

While researching about how to finance a renovation job is a good idea, it's also smart to know how much a job can cost you. The table below shows the different national costs associated with renovating your property.

It shows the costs of three different renovation price points:

  • Basic - A renovation using the cheapest designs and materials available
  • Standard - A job where middle range designs and materials are used
  • High - The most expensive materials, designs and labour costs are used for this type of project
RenovationBasic CostStandard CostHigh Cost
Bathroom$2,0962$38,696$54,804
Bedroom$8,948$13,786$18,612
Kitchen$23,264$42,017$69,738
Room renovation$10,514$16,586$22,648
Garage (extension)$15,131$28,076$39,987
Interior Plastering$25,220$28,897$32,536
Laundry$9,172$15,466$21,752
Ensuite$16,618$25,544$31,692
Attic conversion$52,464$66,073$91,597
Floorboard restoration$10,856$27,689$44,518
Roofing (tiled)$18,860$23,690$28,492
Room extension (ground level)$38,475$62,767$83,865

 Source: finder.com.au, Australian Institute of Architects

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

Frequently asked questions

I just recently finished renovating my property, can I refinance it to buy another property?

If the property is finished, then the answer is yes. A valuer will look at the finished and make an assessment based on that. You may also want to use the services of a mortgage broker during this time.

Can I top up my home loan to renovate?

Yes, topping up is another way you can finance renovations. Your lender will reassess your application to determine if you're eligible for a top up.

Can I top up my investment loan claiming renovations but use this money to pay off my home loan?

You can't shift non-deductible debt, such as debt from a owner occupier loan into a deductible loan, such as your investor loan. Since your home loan is not for investment, you won't be able to claim the deduction for the portion that came form your investment loan.

Can I use my redraw facility to make renovations?

You can access any additional repayments you may have made to finance your renovations, but there may some risks in doing this. You'll need to consider if the funds are better places in your home loan and reducing the amount of interest you're required to pay, versus the impact of your renovations.

Can renovations make my investment property positively geared?

The answer to this question will depend on your personal and financial situation. While renovations can help bring up the value of your property, it may not necessarily increase the price of rent or tenants available. It's best to speak to your buyer's agent regarding this.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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