Home Loan with Renovation – Transform Your Space (2026)

Renovating your home can be an exciting project, whether you’re looking to enhance your living space, increase the value of your property, or simply bring your house up to date. However, the cost of renovations can be daunting. The good news is, in Australia, it is indeed possible to secure a home loan that includes renovation costs. In this guide, we'll explore how you can achieve this, helping you turn your renovation dreams into reality without breaking the bank.

Understanding Home Loans for Renovation

When considering a home loan that includes renovation costs, it’s essential to understand how these loans work. Essentially, you are taking out a loan that not only covers the purchase price of your home but also includes extra funds for renovations. This type of loan is usually structured as a construction loan or a home improvement loan, which allows you to draw down funds as needed for your renovation project.

These loans can be beneficial as they often have lower interest rates compared to personal loans or credit cards. Additionally, you may be able to leverage the equity in your home to secure a more favourable rate. It's important to note that lenders will typically require a detailed renovation plan and budget before approving such a loan.

Current Market Information and Loan Options

As of 2026, the Australian housing market continues to experience steady growth, with many homeowners opting to renovate rather than buy new properties. Interest rates for home loans that include renovation costs generally range from 6.49% to 12%, depending on your financial situation and the lender you choose.

Several options are available for those looking to finance renovations through a home loan:

When considering these options, it's crucial to compare the features, rates, and terms from various lenders. With access to a panel of 83+ lenders, Esteb and Co can help you find a loan that suits your specific renovation needs.

Steps to Secure a Home Loan for Renovation

Securing a home loan that includes renovation costs involves several key steps. Here’s a practical guide to help you navigate the process:

1. Assess Your Financial Situation: Evaluate your current financial health, including income, expenses, and existing debt. This will help you determine how much you can afford to borrow.
2. Create a Detailed Renovation Plan: Outline your renovation goals, including a comprehensive budget and timeline. This plan will be crucial for loan approval.
3. Get a Property Valuation: Obtain a professional valuation to understand your property's current value and how renovations might increase it.
4. Consult with a Mortgage Broker: Engage with a mortgage broker, like Esteb and Co, to explore various loan options and identify the best fit for your needs.
5. Submit Your Loan Application: Provide all necessary documentation, including your renovation plan and property valuation, to your chosen lender.
6. Approval and Drawdown: Once approved, work with your lender to draw down funds as needed for your renovation project.

Expert Tips and Considerations

Embarking on a renovation project with a home loan can be complex, but with the right approach, it can also be highly rewarding. Here are some expert tips to consider:

• Plan for Contingencies: Renovations often come with unexpected costs. Set aside a contingency fund of at least 10% of your total budget.
• Choose Reputable Contractors: Work with licensed and insured contractors to ensure quality workmanship and avoid costly mistakes.
• Understand Loan Terms: Carefully review the terms of your loan, including interest rates, fees, and repayment conditions.
• Keep Communication Open: Maintain regular communication with your lender and contractor to ensure your project stays on track.
• Consider Future Value: Focus on renovations that will add significant value to your home, such as kitchen and bathroom upgrades.

Frequently Asked Questions

• Can I include renovation costs in a first home buyer loan?
  Yes, some lenders offer packages for first home buyers that include renovation costs, but specific conditions apply.
• How much can I borrow for renovations?
  The amount you can borrow will depend on your financial situation, the value of your property, and the lender's policies.
• What is the approval process like for renovation loans?
  Approval typically requires a detailed renovation plan, a property valuation, and a credit assessment.
• Can I do the renovations myself to save money?
  Some lenders may allow DIY renovations, but you must prove your capability and ensure all work meets local building codes.
• How do I access funds during the renovation?
  Funds are usually released in stages as each phase of the renovation is completed.
• Will a renovation loan affect my home insurance?
  It's important to inform your insurer about renovations, as this may impact your policy and coverage needs.
• Can I refinance my existing loan to include renovation costs?
  Yes, refinancing an existing home loan to include renovation costs is a viable option, subject to lender approval.