Renovation Loan – Unlock Home Dreams Fast (2026)

Renovating your home can be an exciting yet daunting task, especially when it comes to financing the project. You're probably wondering if you can secure a renovation loan together with your mortgage. This guide will help you understand your options and how you can turn your renovation dreams into reality without financial stress.

Understanding Renovation Loans and Mortgages

Renovation loans are specifically designed to help homeowners finance the cost of home improvements. These loans can cover various types of renovations, from minor upgrades to major structural changes. When paired with a mortgage, they offer an opportunity to enhance your living space while potentially increasing the property's value.

In Australia, you can combine a renovation loan with your existing mortgage or apply for a new mortgage that includes renovation costs. This can be a cost-effective solution, as it often comes with lower interest rates compared to personal loans or credit cards. Understanding how these loans work and their requirements is crucial to making an informed decision.

Current Market Rates, Requirements, and Options

As of 2026, the Australian home loan market presents various options for those seeking to finance renovations. Interest rates for renovation loans typically range from 6.49% to 12%, depending on the lender and your financial situation. With the right approach, you can find a tailored solution that meets your needs.

Eligibility criteria for renovation loans generally include:

• A minimum credit score of 650
• Stable employment and income
• Equity in your existing property
• Detailed renovation plans and budget

Here's a comparison of some common options available through Esteb and Co's panel of 83+ lenders:

Steps to Secure a Renovation Loan with Your Mortgage

Securing a renovation loan alongside your mortgage requires careful planning and execution. Here's a step-by-step guide to help you through the process:

1. Assess Your Renovation Needs: Determine the scope of your project and set a realistic budget.
2. Check Your Equity: Calculate the equity in your home to understand your borrowing capacity.
3. Research Lenders: Compare offers from multiple lenders, including those on Esteb and Co's panel, to find the best rates and terms.
4. Prepare Documentation: Gather necessary documents such as proof of income, credit report, and renovation plans.
5. Apply for Pre-Approval: Obtain pre-approval to understand your borrowing power and streamline the process.
6. Finalise Your Loan: Work with your chosen lender to finalise the loan agreement, ensuring it covers your renovation needs.
7. Manage Funds and Begin Renovation: Once approved, manage your funds carefully and start your renovation project.

Tips and Considerations

Before diving into a renovation loan, consider the following expert tips:

• Plan Thoroughly: A well-thought-out plan can prevent cost overruns and ensure the project's success.
• Consider Future Resale Value: Focus on renovations that add significant value to your property.
• Consult Professionals: Engage architects or builders early to validate your plans and budget.
• Monitor Interest Rates: Stay informed about interest rate trends to refinance your loan if beneficial.
• Read the Fine Print: Understand all loan terms and conditions to avoid unexpected costs.

Frequently Asked Questions

1. Can I use a renovation loan for any type of home improvement? Most renovation loans allow for a wide range of improvements, but it's best to check specific lender criteria.
2. Do I need a deposit for a renovation loan? Typically, if you're using home equity, a deposit is not required, but it depends on the loan type.
3. How long does it take to get a renovation loan approved? Approval times vary by lender, but it generally takes 3-6 weeks from application to approval.
4. Can I refinance my mortgage to include renovation costs? Yes, refinancing to include renovations is a common approach if you have sufficient equity.
5. What if my renovation costs exceed the loan amount? It's crucial to have a contingency fund or a flexible loan option to cover unforeseen expenses.
6. Are there tax benefits for taking out a renovation loan? In Australia, there may be tax benefits for certain renovations, but it's advisable to consult a tax professional.
7. Is it better to get a renovation loan or use savings? This depends on your financial situation and goals. A loan can preserve liquidity but comes with interest costs.