Renovation loans

By Polly Fleeting ·
young-couple-doing-home-rennovation-with-loan

Bored of your same old home environment? Craving a little pizzazz? You’re not alone!

You don’t have to sell up and buy a new home to have that new home feeling, you can turn your very own abode into the home of your dreams instead! That's right, we're talking renovations. 

No matter how big or small, the truth is, renovating can require a bit of a cash injection, and that's where renovation loans take centre stage. Often these loans come in the form of personal loans, however there are other options out there to help you fund your home's revamp. 

Check out some hot loan options below. 

Personal Loan Comparison Table - page last updated October 17, 2020

Search promoted personal loans below or do a full Mozo database search. Advertiser disclosure.

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  • 6.99% p.a.to 25.69% p.a.

    7.79% p.a.to 26.65% p.a.based on $30,000
    over 5 years

    Terms from 1 to 5 years. Representative example: a 5 year $30,000 loan at 6.99% would cost $36,208.67 including fees.

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  • Hot DealZERO Upfront fee until 31st October 2020^

    6.95% p.a.to 19.99% p.a.

    6.95% p.a.to 19.99% p.a.based on $30,000
    over 5 years

    Terms from 1 to 5 years. Representative example: a 5 year $30,000 loan at 6.95% would cost $35,599.71 including fees.

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  • mozo-experts-choice-2019

    6.49% p.a.to 8.99% p.a.

    6.84% p.a.to 9.34% p.a.based on $30,000
    over 5 years

    Terms from 3 to 5 years. Representative example: a 5 year $30,000 loan at 6.49% would cost $35,459.64 including fees.

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  • 6.75% p.a.to 8.48% p.a.

    6.96% p.a.to 8.69% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,580.23 including fees.

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  • 6.95% p.a.to 17.95% p.a.

    6.95% p.a.to 17.95% p.a.based on $10,000
    over 3 years

    Terms from 2 to 7 years. Representative example: a 3 year $10,000 loan at 6.95% would cost $11,107.53 including fees.

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Is renovating cheaper than buying a new place?

You can make some serious savings by choosing to renovate over moving. Everything from real estate agent fees, relocation costs, stamp duty, the list goes on! However saying that you always save money by renovating isn't always the case. So sit down and crunch the numbers to weigh up if the cost of giving your house a facelift is less than buying something new. 

A solid benefit of renovating and staying in your current home though is that you will potentially add value to your property. This means not only is it nicer to live in once the renos are done but also adds worth in the long run. Bonus!

I want to renovate - is there a loan for that?

Absolutely. Financial institutions know all too well the value of renovating your property. And if your property is already security on your mortgage, they’re probably more than happy to accept an extra renovation loan.

Suitable loans for renos come in all shapes and sizes. They may be called: home loan refinance, top up or line of credit for more substantial amounts. For smaller renovations, you may think about a small personal loan or even a credit card. It all depends on how much you need and what you want to create.

Renovation loan types

Each lender may identify loans suitable for renovations with a different name, so don't be afraid ask your lender to see what they’ve got on offer. Here's some options that may be available to you: 

  • Home loan refinance: Now’s a good time to review your home loan to see if it’s still working for you. Sometimes called a mortgage ‘health-check’, you can assess if your loan is still satisfying your needs. Happy with the interest rate? Remember, there’s always room for negotiation. And if your lender has become too complacent, consider moving your business elsewhere. See here for information on lenders that offer refinance home loans.
  • Home loan top up: This is a great way of getting a whole wad of cash on the side without having to go through all the paperwork. Essentially, ‘topping-up’ on your existing mortgage, you’ll not only save time but may even be able to take advantage of a lower interest rate for the amount you need to renovate. Ask your lender and find out today.
  • Line of credit: Access to your own money? Fantastic! Well it’s access to the equity in your home. You’re probably already aware, that as you pay off your mortgage, you build on what’s called ‘equity’ in your home. That’s the accumulated amount that is deducted form the bulk of what's owed. The great thing about it, you only have to pay interest on the amount that you use, not the whole amount. So you can budget around your renovation and complete your project in stages if you wish.
  • Personal loan: If you don’t want to use the equity in your home, you may want to consider another means of borrowing money for your renovations such as a personal loan. With a personal loan you’ll have flexibility to cap the amount and set a strict deadline for paying back the renovation. Generally, a personal loan is a good option for renovation projects between $15,000 - $30,000.
  • Credit card: Now we’re not discounting the extent of your renovations, but if all you want to do is change the kitchen bench tops and cupboards or build a new deck, then you may not have to fuss with a large loan to deal with your renovations. You may want to consider a low interest credit card or a card with a 0% purchase rate offer. Some credit card rates are comparable with personal loans and if you can get a 0% deal, you won’t need to pay any interest. Just remember, make sure you pay the balance off in full at the end of the project and that it is during the interest free period.

What do I look for in a renovation loan?

  • fixed versus variable interest rate: if you want to ensure that during the time you are paying back your loan that your repayments stay the same, then a fixed rate deal will be best. Variable interest rates are generally lower but you have the risk that your repayments could go up during the renovation loan term.
  • comparison rate: be sure to use the comparison rate to compare loans as this takes into account fees and interest rates to help you understand the true cost of a loan
  • flexible features: Can you make free extra repayments? Or does your loan offer a redraw facility? Generally variable rate loans have more flexibility and while you can generally make extra repayments with a fixed loan, there are usually limits on how much over the renovation loan period.

    The Reno Repayment Plan

    This is where you can think about your short and long-term goals, plan ahead and try and unravel the best possible way to repay your renovation debt.

    To work out how much your repayments will be try Mozo’s personal loan repayments calculator. It will tell you how much your added monthly repayments will be and how much interest you are likely to pay over the duration of the renovation loan. There are some things you may want to consider as part of your repayment plan to help you to save on interest like:

    • Increase your repayments You may be thinking: why on earth would I do that?! However by increasing your repayment amounts, beyond the minimum, you could shave a good number of years off your loan. Wouldn’t you prefer to use your money in other ways that repay a loan off for what seems forever?
    • Lump sums Expecting a handsome tax return? Got some loot coming in from wedding gifts? Sold your collectable car that you stopped driving years ago? Then put it towards your debt! Dropping lump sums into your debt can shave years off your loan. Remember, the less you owe the less you pay!

    Renovate for profit

    When we normally think about renovating our home, we’re envisage the new environment and how lovely and peaceful it will be. A new reading nook, a bigger living space, the options are endless. But did you think for a minute that a reno will potentially increase the value of your home? Yes please!

    You may not want to sell just now, but it’s great to know that your planned renovations are not in vain and will benefit you in the long run. Here are some ideas to get you started:

    • fresh coat of paint, inside and/or out
    • cement rendering the outer shell
    • upgrading the kitchen and/or bathroom
    • remove a few walls for open plan living
    • professional landscaping
    • add a granny flat.

    Go Pro or Do-It-Yourself renovation

    The age-old conundrum. Do you hire a professional team of tradespeople or do you take on the renovation yourself?

    Put it this way. DIY renovations means that you’re genuinely taking a risk and may end up paying double if not more to rectify your errors. It may pay to have a professional look at your job, giving you more time to to plan your wonderful visions instead.

    Make sure when you're sorting through personal loans you check the loan you're looking at is available in your area whether Melbourne, Sydney, Perth or anywhere in Australia.

    *The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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    Polly Fleeting
    Polly Fleeting
    Money writer

    Polly Fleeting is a personal finance writer here at Mozo, specialising in loans and credit cards. Her work is aimed at helping people find ways to make smart product choices, reduce debt and get more for their hard-earned dollars. Polly has a degree in Journalism from the University of Technology, Sydney.