Articles - Finance

3 Funding Solutions for Your Next Home Renovation

23rd May 2018

If you’ve noticed a home in your neighbourhood that’s undergoing renovations or you know a friend or family member who’s currently making home improvements, chances are it’s sparked a few ideas about the projects you could start around your own home.    

But while it’s easy to visualise a brand new kitchen or updated bathroom, unless you’ve already got some savings stashed away, you might not have worked out how you’d actually go about paying for it. So when it comes to renovating, what are some of the best financing options on offer?

Small cosmetic changes

Have a small-scale improvement in mind to refresh the feel of your home? Whether it’s updating the inside of your house with a paint job or putting in a brand new fence, turning to a credit card could be the best way to finance home improvements under $5,000.

Finance Choice: A 0% purchase rate or low rate credit card

Say you were given a quote of $2,300 for a new paint job. If you took advantage of an introductory, 0% purchase rate credit card with no annual fee, you’d be able to pay off your balance with monthly payments of $380 before the 6 month introductory offer ran out - all without paying a cent in interest.

Alternatively, if you think you’re likely to need to spread out your repayments over a longer period, you could opt for a low interest credit card. While you will pay interest this way, it might be worth it for a refreshed feel in your home.

Just bear in mind that while using a credit card can be a worthwhile option for smaller costs, if you’re not disciplined about paying more than the minimum amount due, your new paint job could end up costing far more than you planned.

Medium-sized upgrades 

If you’ve finally decided to bite the bullet on remodelling your bathroom, you’re going to be looking at a price tag in the tens of thousands of dollars depending on your taste. In this situation, or for another renovation in the $5,000 to $30,000 range, a personal loan could be your best financing solution.

Finance Choice: A secured, fixed personal loan

With typically lower interest rates than credit cards, a secured personal loan could prove a quick way to fund that bathroom renovation and a better option for your wallet - especially if you can find a loan with an interest rate below 10.00%. And with a fixed rate you’ll know exactly how much you’ll need to pay back each month, free from any rate hikes.

Just make sure that you do your research into how much your bathroom renovation or any other project is going to cost, and only apply for that amount. The last thing you’ll want is to be approved for a larger loan, only to be tempted to spend the money on features you don’t need.   

Major renovations

When it comes to embarking on serious structural changes like extending your living room or adding a new level to your home, you’re going to need some serious funding. So when the cost of renovations start pushing over $30,000, turning to your home loan is likely to be your best bet.

Finance Choice: A home loan redraw or refinance

If you’ve been making extra home loan repayments, your first step should be using any available redraw to finance your renovation. But if that’s not an option, approaching your lender for an increase on your home loan could be the best financing solution for more costly projects. 

Bear in mind that your lender will want to know about the scope and price of any major improvements you’re wanting to undertake, so make sure you question your renovation builder about the costs involved before you approach your lender.

While your home loan rate may be a lot lower than a personal loan or credit card interest rate, a home loan increase only becomes a better value option than a personal loan if you’re willing to pay off the extra amount you borrow over the same period of time. Otherwise, given that you’ll probably be paying off your home loan over a period of decades, you will likely pay far more interest.

This might not be a problem for you though. In fact, you might find that paying more interest over the life of your home loan is worthwhile if you’re able to finance your extension and add value to your property, while also spreading out the payments further.



About Steve Jovcevski
Steve is a property expert and home loan negotiator at financial comparison website With an extensive knowledge of mortgages and property trends, Steve is full of practical tips to help Aussie property owners get the best value on their home loans.