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How to fund your renovation

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Thinking about updating your home but worry about the costs? Here are some ways to fund your renovation.

No matter how perfect your dream home seems at first, after living there for a while you find yourself yearning for a change. Whether you’re replacing outdated features, adding a new room, or just fixing up minor issues, planning your budget carefully can help you make the best of your home renovation.

How much equity can you access?


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Using your savings may be the simplest solution to securing funds for your home renovation if you’ve got steady saving habits. Having enough saved can help you avoid paying interest, account maintenance and other fees but this can only likely help you with smaller projects such as painting walls or changing old door locks.

Say your project costs more than your savings, or say you’re looking to make structural changes to your home. Lendi provides a list of options that can ease your troubles and help you focus on your design plans.

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Use your equity

You may be able to access your equity if you’ve already paid off a portion of your home loan, or your home has increased in value over time. Using your equity to borrow money for your renovation may be helpful in the long run, as you may be able to increase the value of your home by renovating and improving important features.

How can you access equity?

You can access your equity by refinancing your home loan. This means replacing your existing loan or updating the terms of your current loan, which can also help you get a lower interest rate or more flexible terms. Using your equity to refinance can help you get a sum of money for your renovation while also getting a better rate on your home loan.

Your lender may need to conduct a valuation of your home in order to estimate your current Loan to Value ratio (LVR) and ultimately calculate how much equity you can access.

When accessing equity it’s important to be aware that you are increasing your debt and your repayments are likely to increase, or it may take longer to pay off your loan in full.

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Redraw facility

If your home loan features a redraw facility, you may be able to redraw any extra funds that you have been paying towards your home loan, to fund your project.

You can access the extra funds that you put in to pay off your home loan faster, over and above the minimum monthly payments. While this can be convenient for spending money on your project, you may want to be aware of any fees for withdrawing these funds.

Personal loan

Maybe you’ve already paid off your home loan or you don’t want to go through the hassle of refinancing, personal loans can offer an easier option of a smaller amount of money more suited for projects such as repairs. You can choose from fixed or variable rate loans that are best suited to your needs.

This can offer you a sense of flexibility but may also complicate things for you because you’re taking on another form of debt. You may have to deal with different repayment plans if you’re still paying off your current home loan.

Building and construction loans

If you’re looking to make some big structural changes to your home, you may want to consider whether you meet the conditions for a construction loan. It is typically a sum of money offered in increments called “progress draws”. These stages may include:

  • Foundation
  • Frame and brickwork
  • Lock up
  • Second fix
  • Completion

Depending on the scale of your renovation, the funds are given in advance for each stage of construction, and interest is typically charged against each installment drawn. Your lender may send qualified valuers to check on the construction progress against the planned stages. Preparing detailed construction plans and having a budget can help your lender determine the amount to offer you.

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Credit Card

Getting an interest-free or low interest credit card can offer you more flexibility to purchase items needed for your renovation. Beware that credit cards have no set repayment period and typically come with hefty interest fees. There are some credit cards come with an interest-free period where you will not be charged interest until after that period and can be an option as long as you can responsibly manage your repayments.

Don’t overcapitalise

Overcapitalisation occurs when the value of the property does not increase by the same amount you spent on renovating the property. If you plan to live in your property for a long time then spending money on a swimming pool might not bother you, but if you’re renovating to sell, plan wisely. Compare the value of similar properties in the area and budget accordingly.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: property, house, home loan, renovation, renovate, equity, refinance, redraw facility, construction loan

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856, Credit Representative 518849), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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