Can You Get a Home Renovation Loan in Melbourne?

If you’re from Melbourne and you’re thinking of taking on a home renovation loan for a home improvement project, then this article is for you.

Melbournians love to renovate. This was especially evident during the initial years of the pandemic, when an astonishing four out of five Victorians decided to take on home renovation projects. But renovations cost money. According to a report by Houzz, the average renovation project in Australia costs around $21,000, while a high-end renovation could cost upwards of $150,000. 

How are Victorians funding these projects? At least 1 in 10 admitted to using a credit card, while less than 1 in 5 used the proceeds from a house sale. If you’re planning a renovation, what’s the best way to fund the project? You might consider a renovation loan.

What Renovation Loans are Available?

Can you get a home renovation loan in Melbourne? Yes, you can! In fact, you may be surprised to hear there are multiple different kinds of home renovation loans now available in Victoria. Your choice of finance will likely depend on the proposed size and cost of your renovation, your current financial situation, and what features your current home loan gives you access to.

1. Construction Renovation Loans

A construction renovation loan is a great option for substantial projects that are going to add significant value to your property. Rather than supplying all of the money upfront, renovation loans release the funds incrementally, based on a progress payment schedule. The great thing about this kind of renovation loan is that you only pay interest on the funds that have already been released (so you won’t be charged interest on the total until after the project is completed).

2. A Personal Loan for A Renovation

A range of lenders now offer borrowers the option of a personal loan for a renovation. Personal renovation loans are reasonably simple to obtain, making them a good choice for smaller renovation projects. Personal renovation loans will also give you access to funds without impacting your existing assets in any way. However, a personal renovation loan may come with a higher interest rate compared to a construction renovation loan.

3. Refinance for a Home Renovation Loan

An alternative to taking out a new renovation loan is refinancing your existing mortgage to access equity. Your equity is the difference between what your property is worth and your current mortgage balance. For example, if your property is worth $500,000 and your mortgage balance is $300,000, this leaves you with $200,000 worth of equity. Refinancing will give you access to finance at a significantly reduced interest rate (when compared to credit cards or personal renovation loans).

4. Top-up Your Home Loan for a Renovation

Rather than taking out a new home renovation loan or refinancing to a different lender, you could instead decide to top up your existing mortgage. This essentially allows you to borrow extra funds on your existing home loan rather than applying for a separate loan for the renovation. This keeps things simple (since you won’t have to change lenders or juggle multiple repayments) while still giving you access to a low interest rate.

5. Redraw on Your Existing Home Loan

Another alternative to construction home renovation loans is to use a redraw facility. A redraw facility is a mortgage feature offered by some lenders that allows you to withdraw any additional funds you’ve already paid back on your mortgage. For example, if you’ve been making an additional payment of $500 per month for the past 5 years, you could potentially have $30,000 worth of funds available for redrawing. These funds could then be used in place of a home renovation loan.

Talk to a Broker About a Home Renovation Loan in Melbourne