How to Finance A Property Renovation

Renovating a property is an ambition that many of us share.

Whether you are looking to do major structural renovations or just cosmetic ones, the key to success is to plan everything carefully and set a budget so that you don’t overspend.

When it comes to financing your renovation, there are many options that may be more or less suitable – depending on the type and cost of the renovations you want to make and your personal financial circumstances.

In this article, we take a look at the different options for financing property renovations

Refinancing your mortgage

Larger renovations need a larger amount of money to achieve.bucket money

If you’re doing major renovations that include structural changes like extending the floor plan, adding a pool or a second storey, then refinancing your mortgage might be your best option.

This will increase your mortgage, however your renovations may also increase the value of your home.

Whether or not refinancing is suitable for you depends on the type of mortgage you currently have and the break costs involved. (It may be the case that the cost of refinancing is prohibitive on your particular mortgage).

We can crunch the numbers for you to help you decide if refinancing is your best option.

Construction loans

If you are doing major construction in your renovation that involves the long term services of a contracted builder, then you might want to consider a Construction Loan.

These loans are designed to make the building process easier and allow you to draw down on funds as you need them so you only pay interest on the funds you use, when you use them.

This can mean big savings, particularly on large scale renovations that may cost $100,000 or more.

When construction is complete, you can often nominate which home loan product the Construction Loan reverts to, moving forward.

Construction Loans are a good idea if you’re undertaking expensive renovations that may take a while to complete.

If you already have a mortgage on the property you wish to renovate, then you may have to refinance to access a Construction Loan.

Extend your mortgage

Depending on the type of mortgage you have and the amount of funds you require, extending your mortgage to access funds to renovate may be an option.

This will be easier to do if you have held your mortgage for a while and have built up equity in your property.

If your renovations are going to add significant value to your property, then a simple extension of your existing mortgage may be a good idea.

You can plan to spread your renovation costs out over time and recoup the costs with a higher sale price when it comes time to sell.

Home equity loans

If you’ve owned your home for a while, chances are that your property has increased in value while your mortgage has been reducing.home-loan-300x258

Home equity loans allow you to access that built up equity even if you don’t want to refinance or sell. It is possible to take out an additional loan against this equity only – provided your financial circumstances allow you to service the additional expense.

Getting a home equity loan involves having your house valued to determine the amount of equity you have.

Unlike a regular mortgage which must be spent on purchasing a home, a home equity loan can be spent on anything you choose – renovations, investments, consolidating debts and so on.

 Line of credit

A line of credit is similar to a home equity loan in that it is usually secured against your home.

Unlike most home equity loans that give you the funds in a lump sum, a line of credit gives you access to money that you can draw down as needed. You only pay interest on the money you use.

A line of credit is like a credit card with a lower rate of interest. You can use it for just about anything – which means that you have to be strict with yourself so you preserve the equity you have in your home and don’t fritter it away on things you don’t need.

An additional feature of a line of credit is that you only have to pay the interest each month on the funds that you have used.

You don’t have to make regular repayments on the principal as long as you always pay the interest due. This can be an advantage if you plan to renovate and sell sooner rather than later.

Use your redraw facility

Many home loan products these days offer a redraw facility.

This allows you to withdraw any extra payments you may have made on your mortgage. If you are ahead on your mortgage and wish to access funds to renovate, this is an excellent option.

Remember, planning ahead and setting a strict budget is the key to success!

Having your finances in place before you begin is very important to the smooth progress of your renovation plans. 

Want more of this type of information?

Andrew Mirams


Andrew is a leading finance strategist who holds a Diploma of Financial Planning (Financial Services). With over 27 years of experience in finance, Andrew has been acknowledged by the mortgage industry with multiple awards.Visit

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