Most renovations are funded from savings, redraw or a loan top-up using your equity, while major structural work usually needs a construction loan.
Match the funding to the job. Small work comes from savings, an offset or redraw; medium work from a loan top-up using your equity, valued on today’s home or the finished one; structural work or a second storey from a construction loan paid in stages.
Lenders want quotes, plans and approvals before they release funds.
Part of the refinancing guide.
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For upgraders and investors, how much of your home could work as a deposit.
That usable equity could work as a deposit on an investment property or renovation, structured so your properties aren’t tied together unnecessarily.
Usable equity assumes lending to 80% of your home’s value against your current loan. Lender policy and serviceability decide the real figure.
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Major work often needs a development application or a complying development certificate before a lender will fund it. Across the Inner West, many streets sit in heritage conservation areas, where approvals take longer and design changes are common.
Allow for that time in your plans, because loan approvals and valuations only stay current for a limited period.
For a top-up, the limit is usually your equity: up to 80 per cent of the property’s current value, less what you owe, without paying LMI, and provided your income supports the larger repayment.
For a construction loan, the lender works from the as-if-complete value instead. The calculator on this page shows the equity side, and Charles can test the repayments across lenders.
Usually, yes. If you have enough equity and your income supports the higher repayment, your lender can increase the loan, known as a top-up. Larger structural work is more often funded through a construction loan that pays the builder in stages.
Money you already have in savings or an offset account, because there is no new debt and no application. After that, a home loan top-up is usually cheaper than a personal loan or a credit card because of the lower interest rate.
For structural work, generally yes. Lenders funding major renovations usually want approved plans and a building contract before they commit. Cosmetic work such as a kitchen or bathroom refresh often needs neither.
Yes, and the loan structure matters for tax. Keeping the renovation borrowing in its own split, separate from personal debt, makes the interest easier to track. Repairs and improvements are treated differently for tax, so check with your accountant.
It can, but rarely dollar for dollar. Valuers look at what comparable renovated homes sell for, so overcapitalising is a real risk in some streets. A construction loan valuation done on an as-if-complete basis gives you an independent view before you start.
Thinking bigger than a renovation? Our guide to knock down rebuild loans covers starting again on the same block.
Charles can work out how much equity you can use, which structure suits the scope of work, and what the lender will need before you sign a builder.
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General information only, not credit or financial advice. Lender policies on renovation and construction lending, valuations and progress payments vary and change over time. Council requirements depend on the property and the scope of work.
