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Home renovation loans: everything you need to know

Thinking about renovating your home? Exciting times ahead. Whether you’re interested in carrying out minor home improvements to your property, like a refreshed bathroom, or tackling a larger project, like a full extension or remodel - you may need to borrow some money upfront to get the job done. That’s where your bank could help.

There are a few ways you can fund your renovation project, depending on the size of the project and your financial situation. Let’s take a look at your options.


Using your home equity for a home loan top up

First, let’s understand equity. Equity is the difference between the value of your property and the amount you still owe on your home loan. Equity is usually built up over time as you pay down your mortgage, and if the market value of the property increases.


To get an idea of the amount of usable equity you might have in your home, use our home equity calculator. Keep in mind that you won’t be able to access all the equity in your property – your lender will calculate how much of it you can borrow. At Westpac, we calculate your usable equity as 80 per cent of the total value of the property, minus the outstanding balance of your loan.


So how can you use your equity to fund your renovation? A home loan top up (or increase) allows you to borrow extra money against your current home. If you have equity in your home (and room in your budget to make extra repayments), you could potentially ‘top up’ your existing home loan amount to help you pay for a renovation.


At Westpac, we’re all about flexibility - giving you the freedom to manage your finances as it suits you. You could either combine your new loan balance with your current mortgage repayments or keep it separate on a different loan term. The choice is yours. The interest rate on the topped-up amount will be the same as your original loan, but in some cases you might even be able to negotiate a lower rate on the additional funds.


It’s important to remember that topping up your existing home loan might increase your monthly payments or lengthen the time it takes to pay off your home loan. See what topping up your home loan could mean for you with our home loan repayments calculator.


Redraw facility

A redraw facility is a home loan feature that lets you make extra repayments on your mortgage to help you pay it off sooner, while still giving you the flexibility to withdraw that money if you want to. Depending on the type of home loan you have, and if you’re ahead in your repayments, you might be able to access these funds to help pay for your renovation costs. Find out how much you can redraw in your internet banking. Feel free to reach out to our team if you have any questions. 

Interest-only repayments

To free up your cash flow, switching from principal and interest repayments to a period of interest-only repayments could free up enough funds to get you started. Whether you have a fixed or variable rate home loan, over the life of the loan, you could apply for interest-only repayments for up to 5 years on an owner-occupied home loan or up to 10 years on an investment loan.  

Construction option

If you’re looking at taking on a larger project, like a knock-down or remodel, our construction option could be the way to go. Wondering what’s the benefit compared with other types of financing? Well, you’ll receive your money in increments – allowing you to pay invoices and bills as they come in. Rather than dealing with a lump sum, these progress payments might help you manage your cash flow better. The best bit? You’ll save a bit of money, as you’re only paying interest on the progress payments made so far. After the loan is fully drawn down, you’ll generally revert to paying principal and interest.


Personal loan

If you don’t have enough equity in your home, or you don’t have a redraw facility, you might want to check your eligibility for a personal loan for your renovations. A personal loan could be ideal for DIY renovations on the smaller side, like adding a deck or giving your laundry a facelift. At Westpac, we offer unsecured personal loans from between $4,000 and $50,000 – and the funds are deposited into your account as a lump sum. Personal loans often have a lower interest rate than credit cards (but a personal loan rate may however be higher than a home loan rate), and there’s no need to provide collateral if you decide to go with an unsecured loan.


As always, we’re here to help – every step of the way. For more information on the type of loan that might be right for you to fund your next renovation, call us on 132 558 or visit a branch to chat to your local Home Finance Manager.


Bank with another lender? No worries. Our team can assist in finding you a home loan that better suits your renovation needs and help you refinance and make the switch to Westpac.

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Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice. Credit provided by Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

Key Fact Sheet for Home Loans