There's no single "renovation loan" — there are several ways to fund a reno, and the right one depends on the size of the job and whether you've got equity to draw on.
Using your home equity
For most owners with an established mortgage, equity is the cheapest option. You borrow against the difference between your property's value and your loan balance (lenders generally let you use up to 80% of the value minus what you owe), at standard mortgage rates. It's the go-to for larger renovations.
A construction (renovation) loan
For structural work, lenders release funds in stages as the build progresses, and you're charged interest only on what's been drawn. Rates are usually a little higher than a standard mortgage, and there's more paperwork (plans, fixed-price contracts, progress inspections).
Personal and green loans
- Secured personal loan — backed by an asset; larger amounts and lower rates than unsecured, longer terms.
- Unsecured personal loan — no collateral, faster, but smaller limits and higher rates.
- Green loan — for energy-efficiency upgrades, often at competitive rates.
Personal loans typically range from a few thousand up to around $100,000 over one to seven years — good for smaller jobs or when you don't want to touch the mortgage.
Redraw and credit cards
If you've made extra mortgage repayments, a redraw facility lets you pull that money back out — cheap and simple where available. Credit cards only make sense for small, short-term costs, given the higher rates.
Spend where it adds value
Kitchens, bathrooms and street appeal tend to pay back. Things that often don't: over-personalised finishes, poor DIY, pools, knocking rooms together (fewer bedrooms can hurt resale), and anything done without council approval.
Want this mapped to your situation?
Book a free Clarity Call and we'll talk through where you are and what your next move should be.
Book a Clarity Call — It's FreeCommon questions
What's the best way to finance a renovation?
If you have equity, borrowing against it at mortgage rates is usually cheapest. For structural work, a construction loan releases funds in stages. Smaller jobs can suit a personal or green loan, or a redraw if you've made extra repayments.
Do renovation loans have higher interest rates?
Construction loans are usually a little above standard mortgage rates, and unsecured personal loans are higher again. Borrowing against home equity is typically the lowest-rate option.
Can I use my home equity to renovate?
Yes — it's one of the most common and cost-effective ways. You can generally access up to 80% of your property's value minus your current loan balance, at standard mortgage rates.
This article is general information only and doesn't take your personal circumstances into account. It isn't financial, tax or investment advice. Tax rules and lender policies change — confirm your position with a licensed professional or the ATO before making decisions.
