There are several ways to finance a home renovation, and the right option depends on the size of the project, the equity available in your property, your borrowing capacity and how the renovation work will be completed.
For larger or structural projects, our construction finance service explains how CBM Mortgages can help you understand construction loans, progress payments and suitable lending structures before work begins.
For smaller renovations, the right solution may be very different. You may be able to use savings, redraw existing additional repayments, increase your home loan, refinance to another lender or use another form of finance.
The important part is to match the finance to the project rather than choosing a funding method simply because it is available.
How can I finance a home renovation?
Your options can depend on factors including:
- the expected renovation cost;
- whether the work is cosmetic or structural;
- your existing home loan balance;
- the property’s current value;
- the equity available in the property;
- your income and borrowing capacity;
- whether council or other approvals are required;
- whether a licensed builder is completing the work; and
- how and when the builder needs to be paid.
Here are six funding approaches worth understanding.
1. Use savings for smaller renovation costs
Using available savings can be the simplest option for relatively small projects because it does not increase your debt or require a new lending application.
However, using all your available cash for a renovation can leave you without an appropriate emergency or settlement buffer.
Before committing savings to the project, consider how much cash you need to retain for unexpected building costs and normal household expenses.
2. Use available redraw from your home loan
If your home loan has a redraw facility and you have made additional repayments, you may be able to access some of those funds for renovation work.
Redraw is different from borrowing new money because it generally involves accessing repayments previously made above the minimum required amount.
The availability and conditions of redraw depend on your existing loan.
Check with your lender before relying on redraw to pay builders or suppliers, particularly if payments need to be made according to a construction schedule.
3. Increase or top up your existing home loan
If you have sufficient equity and borrowing capacity, your current lender may allow you to increase your existing home loan.
This can be suitable for some renovations where the lender is comfortable with the property, proposed loan amount and purpose of the additional borrowing.
Equity is the difference between the property’s value and the amount you owe, but that does not mean all of the equity can automatically be borrowed.
Lenders consider the resulting loan-to-value ratio, your ability to service the increased debt and their current lending policy.
4. Refinance your home loan and access equity
Renovation plans can also be an appropriate time to review whether your existing home loan still suits you.
Refinancing may allow you to restructure the existing mortgage and potentially access usable equity for the project, subject to valuation, lending criteria and serviceability.
Changing lenders can involve switching costs, so any benefit from refinancing should be considered alongside the costs of the new loan and the additional renovation borrowing.
If you are considering changing lenders as part of the project, our guide to the costs of refinancing a home loan explains the types of costs to consider.
5. Use a construction loan for major renovations
A construction loan can be appropriate for substantial renovations where funds need to be released progressively as building work is completed.
CommBank’s construction-loan information describes staged funding for major renovations and construction projects, with funds drawn as stages of the work are completed.
Westpac similarly describes construction lending using progress payments rather than releasing the entire approved amount at the beginning of the project.
During the progressive-draw period, interest is generally charged on the amount that has actually been drawn rather than the full approved construction limit.
What are construction loan progress payments?
Rather than giving the borrower the entire construction loan upfront, the lender releases funds as agreed stages of construction are completed.
Common stages may include:
- foundation or slab;
- frame;
- lock-up;
- fit-out; and
- completion.
The exact process varies between lenders, builders, contracts and projects.
Lenders may require documentation such as plans, specifications, a building contract, payment schedules, valuations or progress inspections before particular funds are released.
That is why it is important to establish the finance structure before committing to a major renovation contract.
6. Consider a personal loan for appropriate smaller projects
A personal loan may be an option for some smaller renovation projects where using a home loan or construction facility is not appropriate.
Personal loans generally have shorter repayment terms than home loans and may have higher interest rates than lending secured against property.
That can mean a higher regular repayment, although the debt may also be repaid over a shorter period.
Compare the interest rate, fees, loan term and total expected cost rather than looking at the loan amount alone.
Should I use a credit card to pay for renovations?
A credit card may be convenient for individual purchases, but it should not automatically be treated as a renovation-finance strategy.
Credit-card interest can be substantially higher than home-loan interest, and carrying a renovation balance beyond an interest-free period can become expensive.
If you intend to use a card for purchases, make sure you understand the interest rate, fees and how the balance will be repaid.
How much equity can I use for renovations?
Having equity in a property does not mean you can automatically borrow the full amount of that equity.
For example, consider a property valued at $800,000 with an existing home loan of $400,000.
The homeowner has $400,000 of total equity. But if a lender were comfortable with a maximum loan-to-value ratio of 80% for the particular application, the calculation would be:
- 80% of $800,000 = $640,000;
- less the existing $400,000 loan;
- leaving approximately $240,000 of theoretical equity below an 80% LVR.
That does not mean the borrower can automatically access $240,000.
The lender must still assess income, expenses, existing debts, the purpose of the funds, the property, valuation and the borrower’s ability to service the increased loan.
Do I need a construction loan for every renovation?
No.
A construction facility may make sense for a major structural renovation where a builder is paid across agreed construction stages.
A smaller cosmetic renovation might be funded through savings, redraw, an existing loan increase or another suitable finance option.
The scope of work matters.
Replacing flooring and repainting a home has very different finance requirements from adding another storey, substantially altering the structure or completing a major extension.
What should I organise before applying for renovation finance?
Before applying, establish a realistic project budget and understand what documentation will be required.
Depending on the project and lender, useful information may include:
- your existing home loan balance and rate;
- the property’s estimated current value;
- your renovation budget;
- quotes from builders or contractors;
- plans and specifications for major work;
- building contracts where applicable;
- council or other approvals where required;
- your income and employment information;
- existing debts and credit limits; and
- a contingency for unexpected project costs.
A contingency should be based on the particular project rather than automatically borrowing an arbitrary amount above the expected renovation cost.
Should I refinance or use a construction loan for renovations?
That depends largely on the nature of the renovation and your existing financial position.
A refinance or home-loan increase may be suitable where the renovation funding can be provided upfront and the lender is satisfied with the purpose, valuation, equity and serviceability.
A construction loan may be more appropriate for major building work where the lender expects funds to be released progressively against stages of construction.
CBM Mortgages can help you compare these structures and identify lenders whose construction and renovation policies may suit your project.
Frequently asked questions
What is the best way to finance a home renovation?
The appropriate option depends on the cost and type of renovation, your available savings and equity, your borrowing capacity and how the work will be paid for. Options can include savings, redraw, increasing or refinancing a home loan, a construction loan or, for some smaller projects, a personal loan.
Can I use the equity in my home to renovate?
Potentially. Available equity can affect how much additional borrowing may be possible, but the lender will also assess the property’s value, resulting loan-to-value ratio, your financial position and your ability to service the increased debt.
When would I need a construction loan for renovations?
A construction loan may be appropriate for substantial or structural renovation work where funds need to be released progressively as agreed building stages are completed. The requirements vary between lenders and projects.
Do construction loans charge interest on the full loan amount straight away?
During construction, lenders commonly charge interest on the amount that has been progressively drawn rather than the full approved construction limit. The exact repayment and interest arrangements depend on the lender and loan.
Can CBM Mortgages help compare renovation finance options?
Yes. CBM Mortgages can review your project, existing home loan, available equity and borrowing position and compare suitable renovation and construction finance options based on your circumstances.
Planning a renovation?
CBM Mortgages can help you understand your available equity, borrowing position and renovation finance options before you commit to the project.
Disclaimer: This article provides general information only and does not constitute personal financial, legal, tax, building or credit advice. Lending policies, interest rates, fees, valuations and construction requirements can change. Consider your circumstances and obtain appropriate professional advice before entering a building contract or applying for credit.
Written by Craig McDonald. Updated November 2026.
