How do renovation loans work?
Renovation loans work like any loan with a clear purpose: you borrow a set amount for the project and repay it over an agreed term. The big decision is where the money comes from — a personal loan or your home’s equity.
With a personal renovation loan, the funds usually land in your account at settlement and you pay your trades as work progresses. With a mortgage top-up or refinance, the extra is added to your home loan and repaid over its much longer term.
Personal loan vs using home equity for a renovation
Neither is automatically better. It comes down to the size of the job, how much equity you have and how soon you want the tradies on site.
| Personal renovation loan | Mortgage top-up or refinance | |
|---|---|---|
| Home equity needed | No | Yes |
| Security | Usually unsecured | Secured against your home |
| Paperwork and timing | Lighter, often quicker | More involved, may need a valuation |
| Loan term | Shorter, with a fixed end date | Spread across the life of your mortgage |
| Good fit for | Kitchens, bathrooms, decks and smaller jobs | Extensions, granny flats and whole-house projects |
Stretching a reno across a long mortgage term can mean smaller repayments but more interest in total. If equity looks like the better route, our specialist team can help with refinancing your home loan.
What renovations can I finance?
Almost any genuine improvement to your home. Here’s how the usual projects shape up:
- Kitchens: often the biggest spend. Kitchen renovations commonly range from about $15,000 to $50,000+ depending on scope.
- Bathrooms and laundries: waterproofing, tiling, fixtures and a licensed plumber.
- Outdoor living: decks, pergolas, paving and landscaping for summer entertaining.
- The house itself: roof restoration, windows, doors, insulation and air conditioning.
- Granny flats: a bigger build that usually needs council or certifier approval and often suits equity or a larger loan.
- Energy upgrades: panels and batteries, with rebates covered on our solar panel finance page.
How much can I borrow for a renovation?
That depends on your income, living costs and existing debts, and on the route you choose. Equity-based borrowing can stretch further because the loan is secured against your property.
Work from your quotes up rather than from a lender’s maximum. Then add the things trades often leave out:
- Appliances, tapware and light fittings
- Council or certifier fees
- Skip bins and rubbish removal
- Living costs while the kitchen’s out of action
- A contingency buffer for surprises behind the walls
How do I pay my builder with a renovation loan?
Usually in stages, with you controlling each payment. Most builders ask for a deposit, then progress payments as each stage is finished.
- 1
Lock in a fixed-price quote
Get the scope, inclusions and payment schedule in writing before you sign.
- 2
Check licences and insurance
Confirm your builder is licensed, and ask about home warranty insurance where your state requires it.
- 3
Pay the deposit
Use part of the loan for the deposit and keep the rest aside for progress payments.
- 4
Pay as stages are finished
Inspect the work before each payment and never pay far ahead of what’s been done.
- 5
Hold back for the final touches
Where your contract allows, keep the last payment until defects are fixed.
Adding a pool to the plans? Our pool loans page explains how pool builders stage their payments.
What you’ll need
- Written quotes from your builder or trades
- Scope of works, plans or a design brief
- Council approval details, if your project needs them
- Your driver licence or passport
- Recent payslips, or tax returns if self-employed
- Recent bank statements
- Home loan statement and property details if using equity
Who it usually suits
- Aged 18 or over and an Australian citizen or permanent resident
- Own, or be buying, the home you’re renovating
- Steady income that covers repayments and living costs
- Existing debts at a manageable level
- Enough home equity, only if you choose the top-up or refinance route
