Home renovation finance can come from savings, money in an offset account, available redraw, a home loan increase, refinancing or a separate loan. For major structural work, a construction loan may be appropriate. The right starting point is your project scope, available funds and ability to manage repayments.
Updated 2 November 2026. This guide replaces the original 2025 overview. It compares ways to finance home renovations without assuming that borrowing more will increase your property’s value.
Home renovation financing options at a glance
| Option | When to consider it | What to check |
|---|---|---|
| Savings | Projects you can fund while retaining a cash buffer. | Emergency savings and other upcoming expenses. |
| Offset or redraw | Accessible existing funds or extra repayments. | Access rules and the extra mortgage interest after withdrawing. |
| Home loan increase | Borrowers with sufficient usable equity and repayment capacity. | Valuation, approval, fees and the repayment period. |
| Refinancing | A broader review of your mortgage and additional funding needs. | Switching costs, any break costs and total interest over the new term. |
| Personal loan | A defined project where a separate loan is suitable. | Rate, fees, security and whether the repayments fit your budget. |
| Construction finance | Major renovations requiring staged funding. | Contract, approvals, progress payments and funds for variations. |
Using savings, offset or redraw for renovations
Savings may let you avoid new borrowing, but leave room for emergencies and unfinished work. Spending money from an offset account generally reduces the balance offsetting your mortgage. Redraw accesses eligible extra repayments already made into the loan; availability depends on the loan terms.
Check withdrawal limits and timing before promising a builder payment. Compare the effect on interest and your remaining cash buffer. Read our offset versus redraw guide for the differences.
Can I use equity to finance a home renovation?
Equity is the difference between a property’s value and the debt secured against it. It is not automatically money you can spend. A lender must assess the value it accepts, its loan-to-value ratio (LVR) limit and whether you can afford additional debt.
A usable-equity example
Suppose the lender values your home at $800,000 and you owe $500,000. Total equity is $300,000. At a hypothetical 80% LVR limit, total lending would be capped at $640,000, leaving $140,000 before fees and other adjustments. This is an illustration, not an available offer or borrowing approval. A different valuation or LVR changes the result.
A loan increase with your current lender may be one option. Ask whether the funds can be advanced together, what evidence of their use is required and whether the works call for construction finance instead. Compare the new repayment with your household budget.
Should I refinance to pay for home improvements?
Refinancing may allow eligible borrowers to replace an existing mortgage and request additional funds. Compare discharge, application, valuation and registration costs, any fixed-rate break costs, and potential lenders mortgage insurance. A lower rate does not guarantee a lower total cost if fees or a longer repayment term outweigh the benefit.
Use the refinance calculator as a starting estimate, then request a comparison that includes the additional renovation borrowing. Keep the renovation amount identifiable so you can plan how quickly to repay it.
Using equity versus a construction loan for renovations
Equity describes the property value available above existing secured debt; a construction loan describes a funding structure. They are not mutually exclusive: equity may support either a loan increase or a construction application. The practical comparison is how much you can borrow, when funds are released and what evidence the lender requires.
A top-up using existing equity may suit simpler works where the lender accepts a lump-sum release. Construction finance may suit major works paid in stages and may involve assessment of the proposed completed property. Either pathway still needs affordability and valuation checks. Confirm the project scope before selecting the structure.
A cosmetic bathroom or kitchen update and a structural extension can have different funding requirements. For major works, a construction lender may require plans, approvals, a building contract, a valuation and a staged payment schedule. Payments are generally released as work progresses, subject to the lender’s checks.
Interest commonly applies to the drawn balance during construction. Confirm your repayment structure, progress-payment fees and what repayments will become after completion. Ask who must fund the initial contribution, variations and any shortfall. Do not assume an expected increase in value will cover your entire budget.
For larger projects, see our major renovation construction finance guide and construction progress-payment guide. A knockdown rebuild needs its own planning before demolition.
Is a personal loan suitable for a kitchen or bathroom renovation?
A personal loan is another way to fund home improvements. Compare secured and unsecured options, the repayment amount, fees and total cost. A shorter term may mean larger regular repayments; spreading a renovation across a long mortgage term can also increase the interest paid. Compare actual offers over a realistic repayment period rather than choosing by rate alone.
Renovation finance preparation checklist
- Define the scope: separate essential repairs, cosmetic improvements and structural work.
- Obtain itemised quotes: identify exclusions, payment stages and any approvals needed.
- Budget beyond the build: allow for professional fees, permits, temporary accommodation, storage and a contingency appropriate to the project.
- Gather finance records: current mortgage statements, income evidence, expenses, other debts and available savings.
- Check the funding sequence: confirm approval conditions and access to funds before making commitments.
- Plan for completion: budget for the eventual repayments and retain a buffer for delays or extra work.
Common questions about renovation finance
What is the best way to finance a home renovation?
There is no single best option. Compare your accessible funds, project requirements, repayments and total cost. A small cosmetic project may need a different approach from a structural extension.
Can I borrow money to renovate without equity?
Limited equity may restrict a mortgage increase. Depending on your circumstances, saving, reducing the scope or comparing a separate loan may be worth discussing. Any borrowing still requires assessment; avoid relying on a future property-value increase to make the project affordable.
Does renovation spending increase my home’s value dollar for dollar?
Do not assume so. Set the budget around what you can afford, and check the lender’s accepted valuation rather than relying on the amount you plan to spend.
Discuss your renovation funding plan
Book a renovation finance discussion with Chris Berry. Bring your quotes, mortgage details, savings position and proposed timeline so the funding options can be compared around the actual project.
Sources and further reading
Checked 2 November 2026: Moneysmart: offset and redraw; switching home loans; personal loans; and CommBank’s construction-loan explanation. The lender example is not a product recommendation or an industry-wide rule.
General information only. Loan availability, costs and requirements depend on the lender and your circumstances. Obtain qualified advice about tax, building contracts and approvals where needed.