Quick answer: you can usually access equity up to 80% of your home’s value, minus what you owe, to fund a renovation, if you can afford the higher repayments. Small jobs suit redraw or an offset balance; medium jobs a loan top-up or refinance; major structural work a construction loan paid in stages.
With prices softer and buying costs high, many owners are choosing to improve rather than move. Using equity is usually far cheaper than a personal loan or credit card, but the right structure depends on the size of the job.
How much equity can you access?
Example: a home valued at $1,100,000 with a $550,000 loan.
- 80% of $1,100,000 = $880,000
- Less the $550,000 loan
- = up to about $330,000 available without LMI, subject to the lender’s valuation and your income
Borrowing an extra $100,000 at 6.45% over 30 years adds about $629 a month to repayments, or about $672 over 25 years. Our refinance calculator shows your loan-to-value band.
Four ways to fund a renovation
- Redraw or offset. If you’ve paid ahead or have savings in an offset account, that money is the cheapest option. Offset vs redraw.
- A top-up with your current lender. Increase your existing loan, often as a separate split. Usually quicker, with no discharge costs.
- Refinance and release equity. Move to a lender with a better rate and borrow the renovation funds at the same time. Worth it when the rate saving is real. When refinancing is worth it.
- A construction loan. For major work such as extensions, second storeys or knockdown-rebuilds, funds are paid to the builder in stages, and interest is charged only on what’s drawn. Some lenders value the home as it will be when finished. How construction loans work.
What lenders will ask for
- The purpose. Lenders usually ask what equity is for. Larger amounts may need builder quotes, a fixed-price contract and council or certifier approval.
- Affordability. You’re assessed on the bigger loan at the lender’s rate plus a buffer of around 3%.
- A valuation. The lender orders its own, which may be lower than you expect in a falling market.
Traps to avoid
- Over-capitalising. Spending more than the work adds to the value, especially at the top of your street’s price range.
- Going over 80%. LMI can add thousands. How LMI works.
- Cost blowouts. Build a 10–15% contingency into the budget, and don’t borrow to your limit.
- Mixing loans. If part of the property is, or will be, rented, keep borrowing in separate splits and get tax advice.
Common questions
How much can I borrow to renovate?
Usually up to 80% of your home’s current value, less what you owe, without lenders mortgage insurance, as long as you can afford the higher repayments. For bigger renovations, some lenders use the expected value after the work.
Do I need quotes to release equity for a renovation?
Often, yes. Lenders usually ask what the money is for, and larger amounts may need builder quotes or a contract. Requirements vary by lender.
Should I use a construction loan for a renovation?
For major structural work, a construction loan paid in stages can make sense, and some lenders value the home as if complete. For smaller jobs, a simple top-up or redraw is usually easier.
Is renovation interest tax-deductible?
Not for your own home. Interest is generally only deductible when the borrowed money is used to earn income, such as renovating a rental property. Check with your accountant.
Is it better to refinance or top up with my current lender?
Ask your current lender first: a top-up can be quicker and cheaper. If its rate is uncompetitive or it won’t lend the amount you need, refinancing to another lender can do both at once.
General information only, not financial, tax or credit advice. Repayment figures are estimates for principal and interest at 6.45%. Lender valuations, policies and requirements for renovation funds vary.
