Refinancing For Renovations: How Does It Work?

Before you get too carried away with your renovation plans, you’ll need to figure out a way to fund them. If you don’t have cash in the bank – and who does right? – there are a number of financing options to consider. In this post we’ll take a brief look at the main ways to finance a renovation, so you can work out what will suit your household best.


Cash is always best, but rarely possible unless you are lucky enough to have significant savings in the bank. If you do plan on using savings, don’t forget to factor in an ‘emergency fund’ for any unexpected expenses that arise.

Another cash option is redrawing on your existing loan. If you have been paying extra into your mortgage, you may be able to redraw those funds and use them to pay for your renovation. This will depend on the type of home loan you have as not all home loans have a redraw option and others might charge fees.

The other three most common renovation refinancing options are

  • Personal loan
  • Refinancing your home loan
  • A construction loan


Briefly, the pros and cons of the above 3 financing options are:

Personal Loan – Quick and easy to obtain, but they are usually capped at a relatively low amount. Make sure you compare interest rates as they can vary widely.

Refinancing – Take out a new home loan or extend your current one. The main positive of this option is the opportunity it gives you to re-examine your current home loan and if it doesn’t suit you anymore you can shop around for a better deal. Cons include delays with approval and additional fees (exit fees, application fees and valuation fees for example).

Construction Loan – When you apply for a construction loan, the bank will take into account the value of your home once the renovations have been completed. If approved, you can then draw funds periodically as the invoices arrive.

Read more about renovation loans or contact AK Buckley Building – your local home extension builder in the Shoalhaven.