Feel it’s time to zhuzh up the old abode but not sure where to pull the cash from?
Don’t miss our top tips below.

Has your home started looking more 16^th century ruin than Buckingham Palace? Perhaps it needs a freshen-up with a lick of paint, fresh flooring and new cabinetry. Or maybe you’re keen to do a major reconstruction or extension.

When it comes to home improvements, it can be hard to know where to source the funding. If you’re unsure how to finance a renovation, we have some great ideas that might help you.

How to finance a renovation

Wondering how to finance a renovation? There are many options available, but your personal circumstances will dictate which is the best choice for you. For example, if your household is already feeling stretched with your loan repayments, then topping up your loan will likely not be a good idea. But if you have a lot of equity stored up, this could be the perfect choice.

The size of your renovation will also determine the suitability of each option. For example, a small project might be covered with a personal loan, but a major extension might call for refinancing.

If you’re unsure how to finance a renovation, keep reading as we walk you through the possibilities.

Refinance your home loan to access equity

A popular and excellent way to fund a renovation is by refinancing your home loan. This means finding a more competitive home loan with another lender. Ideally, the new loan will offer financial benefits, such as a lower interest rate. Sometimes they also offer bonuses like cashback and additional features.

Refinancing to a new loan may enable you to increase your loan amount in order to renovate. In most cases these additional amounts will be subject to lender reviews and approvals relating to the renovations.

Refinancing also enables you to use the equity you have built in your property to fund your reno. Equity is the difference between the market value of your property and your home loan balance. As your home (typically) gains value over time, and as you pay off your home loan, you are left with greater equity. Keep in mind you won’t be able to use all of the equity at once, and there will be fees and paperwork involved.

Refinancing is a clever way to ensure you’re getting the best loan deal and to help economy-proof your best asset – your home!

Redraw additional repayments

Does your loan have a redraw facility? This handy little feature can bring big benefits. Redraw allows you to make extra repayments on your home loan. And it also allows you to withdraw that money as needed.

So if you’ve made extra repayments on your home loan, you could use these to finance your reno. Keep in mind that different banks have different rules around minimum and maximum redraw amounts, how often you can use the feature and the process involved. If this is something you’re interested in, speak to our team about the best lender for you!

Access your savings

Another way to fund your refinancing is via your savings. And great way to save when you have a home loan is via an offset account.

An offset account is a type of savings account that is linked to your home loan. And when you hold money in an offset account over a period of time, you can reduce the amount of interest charged on your home loan. (There are also some potential tax benefits!) But in terms of funding your renovation, an offset account will also allow you to withdraw funds for your renovation that you have saved.

If you don’t have an offset account, of course you can also access any other savings you have. It will be up to you to decide whether it’s worth losing your in-case-of-emergency fund, or delaying any other goal you may have been saving for.

Increase your home loan with your current lender

If you have the means to potentially pay higher loan repayments, and equity in your home, you could consider a top-up of your current home loan. This means borrowing more money from your lender which you can then use to fund a renovation. Some borrowers prefer this option to taking out a separate loan, as home loans typically offer lower interest rates.

Of course, your bank or lender will need to decide if you’re eligible. You will also need to decide if you can realistically afford the higher repayments.

Take out a separate loan

There are a few types of loans that could work when choosing how to finance a renovation. A personal loan, for example, is a great short-term option for smaller-scale projects.

For a larger renovation, consider a construction loan. This will give you access to more money, as lenders expect your property will be worth more after the reno. Construction loans release funds in stages, as your project progresses. You will typically make interest-only repayments during the work, and standard repayments thereafter.

Ask the experts how to finance a renovation

If you’re wondering how to finance a renovation, your first step should be to consult trusted professionals. Our team can conduct a thorough review of your finances and home loan. This allows us to consider your circumstances and provide advice on which finance option is right for you.

If you can’t choose how to finance your reno, get in touch with the Lending Loop team today. Let’s mage reno magic happen!