Refinancing for Renovations – How to Fund Your Upgrade Without Draining Savings

Refinancing for Renovations – How to Fund Your Upgrade Without Draining Savings

From kitchens to bathrooms to full extensions, renovations can transform your home — but they’re rarely cheap. Refinancing is one of the most effective ways to fund renovations without dipping heavily into savings or taking on high-interest personal loans.

This guide explains how renovation finance works, how much equity you can use and the smartest ways to structure your loan for flexibility.

1️⃣ Why Use a Refinance to Pay for Renovations?

Homeowners choose refinancing over personal loans because:

• Home loan rates are much lower than personal loan rates.
• You can borrow larger amounts affordably.
• You can access equity you’ve built up over time.
• You can restructure your loan at the same time.

Refinancing gives you the freedom to upgrade without financial strain.

2️⃣ What Renovations Can You Fund?

Refinancing can fund almost any type of project, including:

• Kitchen upgrades.
• Bathroom renovations.
• Outdoor entertainment areas.
• Landscaping or pools.
• Painting and cosmetic changes.
• Extensions or additional rooms.
• Major structural works.

Your budget simply needs to fit within your equity.

3️⃣ How Much Can You Borrow for Renovations?

It depends on:

• Your home’s current value.
• Your existing loan balance.
• Your usable equity (usually up to 80% LVR without LMI).
• Your income and borrowing capacity.

A refinance helps you unlock equity safely without relying on short-term loans.

4️⃣ Two Ways to Finance Renovations Through Refinancing

A) Simple Equity Release (Cash-Out)

You increase your loan and take the extra funds as cash.
Best for:

• Cosmetic upgrades.
• Small to mid-size renos.
• DIY or flexible-use renovation budgets.

B) Construction Loan / Progress Payments

Funds are released in stages as the renovation progresses.
Best for:

• Large structural renovations.
• Extensions or second-storey additions.
• Projects needing council approval and fixed builder contracts.

Your strategy depends on the size and nature of your renovation.

5️⃣ How a Valuation Works for Renovation Refinances

Lenders may use:

• Current value (for simple equity release).
• “On-completion” value (for major structural renovations).

On-completion valuations can significantly boost how much you’re able to borrow.

6️⃣ What Lenders Look At

For renovation refinances, lenders review:

• Your income stability.
• Your credit history.
• Your equity level.
• Your renovation plans or builder quotes (for larger projects).

The stronger your equity and cash flow, the easier the approval.

7️⃣ How to Avoid Overcapitalising

A renovation should add value — not just cost money.
Avoid overcapitalising by:

• Comparing your plans with recent sales in your area.
• Focusing on upgrades buyers value most (kitchens, bathrooms, outdoor spaces).
• Choosing materials appropriate for the property’s price bracket.
• Keeping an eye on total project cost vs market value.

Renovate for both lifestyle AND future resale.

8️⃣ Cash-Out Restrictions You Should Know

Some lenders have rules around:

• Maximum cash-out limits.
• How funds can be used.
• Documents needed for larger projects.
• Whether structural changes require a construction loan.

The right lender can unlock more flexibility — especially for bigger upgrades.

9️⃣ Renovation Budget Tips

To stay in control:

• Get multiple quotes to avoid overpaying.
• Add a 10–15% buffer for unexpected costs.
• Keep some emergency savings separate if possible.
• Track all expenses during the project.

Good budgeting protects both your home and your loan.

🔟 The Smartest Way to Refinance for Renovations

A broker can help you:

• Calculate your usable equity.
• Choose between simple cash-out or construction loans.
• Find lenders offering high cash-out flexibility.
• Structure the loan to keep repayments manageable.