There are four ways to fund a reno. The trick is matching the loan to the job.
A new kitchen and a second-storey extension aren't the same project — and they shouldn't be financed the same way. Depending on the size of the job and the equity in your home, the right tool might be an equity top-up, your existing redraw or offset, a construction loan for structural work, or a plain personal loan for a smaller cosmetic refresh. Here's how each one works, and which fits which renovation.
Which reno finance fits your project.
Four common ways to fund a renovation, rated across the things that actually decide it: how big a job it suits, whether it's secured against your home, how flexibly you can draw the money, and where it tends to sit on cost. Ratings are typical and illustrative — your own numbers depend on your equity, income and the lender.
Ratings are typical/illustrative only and general in nature — not personal advice, an offer of credit, or a quote. Home-loan-secured options (equity top-up, redraw/offset, construction) generally carry lower interest rates than an unsecured personal loan, but they put your home up as security: if you can't repay, the home is at risk, and spreading a small reno over a 25–30 year mortgage can cost more in total interest despite the lower rate. Indicative rates: owner-occupier variable home loans have averaged around 6.2%–6.9% p.a. and unsecured personal loans roughly 6.5%–20%+ p.a. (rates move with the cash rate; always compare the comparison rate, not just the advertised rate). Your actual options depend on your circumstances and are confirmed in writing.
Cosmetic or structural? That answer picks your finance.
Before comparing loans, work out which kind of renovation you're doing — it narrows the sensible options straight away.
Cosmetic renovations
Surface-level work that doesn't change the building's structure or footprint. Faster, more predictable, and rarely needs a construction loan.
- New kitchen or bathroom refit
- Flooring, painting, fixtures, joinery
- Landscaping, deck, fencing
- Best funded by redraw/offset, an equity top-up, or a personal loan for smaller jobs
Structural renovations
Work that changes the structure or footprint — the lender treats it more like a build, and progress-payment (construction) finance often fits best.
- Extensions, second storey, granny flat
- Removing or moving load-bearing walls
- Re-stumping, major re-roofing, garage conversion
- Best funded by a construction loan or a larger equity release
The mechanics, in plain terms.
Equity top-up (loan increase)
You borrow more against your existing home loan, up to the equity available (typically to around 80% of the property's value before lenders' mortgage insurance applies). One home-loan rate, one repayment — good for larger jobs, but it's secured on your home and spread over the loan's term.
Redraw & offset
If you've paid extra into your loan, redraw lets you pull those funds back for the reno; an offset account works similarly by using your own savings. It's the cheapest money you'll find because it's effectively your own — but only as far as the funds you're ahead.
Construction loan
For structural work, funds are released in stages as each milestone is finished, and you pay interest only on what's drawn. It needs a fixed-price builder's contract and council approval — more paperwork, but the right structure for a major build.
Personal loan
An unsecured lump sum repaid over 1–7 years. No equity or property valuation needed — renters can use it too — and it doesn't touch your mortgage. The rate is higher, but the shorter term can mean less total interest on a small job.
Renovating is where a lot of Australians are putting their money.
With limited new supply and the cash rate holding steady, upgrading the home you already own has stayed popular through 2026.
Sources: ABS Building Approvals, Australia (alterations & additions component, seasonally adjusted, May 2026 release; year-on-year figure per the March 2026 release; both subject to revision). RBA Cash Rate Target (as at July 2026). Approvals measure work approved, not spend, and can be revised.
Not every renovation dollar comes back at sale.
As a rough guide, a full kitchen renovation runs to a national median of about $35,000 and a mid-range bathroom around $26,000 — but the range is enormous depending on scope, state and finishes. Spending big on a premium fit-out in a modest street can mean "over-capitalising": pouring in more than the local market will pay back when you sell.
It's worth thinking about how much of the cost is likely to lift the property's value versus how much is purely for your own enjoyment — and choosing finance that suits which one it is. A short, cheaper personal loan can make more sense for a cosmetic refresh than adding it to a 30-year mortgage.
Cost figures are typical/illustrative national guides only and vary widely by scope, state and finishes; they are not quotes. Whether a renovation adds value depends on the property and market — consider seeking your own professional property and financial advice. Sources: HIA-referenced bathroom guide; What's The Damage / co-architecture kitchen cost guides, 2026.
A quick word on borrowing against your home
Three of the four options here are secured against your property. That's what makes their interest rates lower — but it also means the home is on the line if repayments become unaffordable, and stretching a renovation across the full mortgage term can quietly cost more in total interest than a shorter loan at a higher rate.
This page is general information to help you understand the options — it isn't personal credit, tax or financial advice, and it isn't a recommendation of any particular product. We'll talk through the trade-offs for your situation before anything is applied for.
Renovation finance, answered straight.
What's the best way to finance a home renovation?
It depends on the size of the job and your equity. For smaller cosmetic work, a personal loan or your existing redraw/offset is often simplest; for larger jobs an equity top-up on your home loan usually gives a lower rate; and for structural work a construction loan that releases funds in stages tends to fit best. There's no single "best" — it's about matching the tool to the project, which is what the comparison above is for.
Do I need a construction loan to renovate?
Only for structural or major building work — extensions, a second storey, a granny flat, or anything that changes the building's footprint and needs council approval. Cosmetic renovations like a new kitchen or bathroom are usually funded more simply through redraw/offset, an equity top-up, or a personal loan, without the progress-payment structure of a construction loan.
Should I use my home equity or a personal loan?
Using home equity (a top-up, redraw or offset) is secured against your property, so the interest rate is generally lower — but the home is at risk if you can't repay, and spreading a small reno over 25–30 years can cost more in total interest. An unsecured personal loan carries a higher rate but a shorter term, doesn't touch your mortgage, and is available even if you have little equity or rent. We can compare the total cost of both for your situation.
Can I use my redraw or offset to pay for a renovation?
Yes, if you've made extra repayments on your home loan. Redraw lets you pull those additional funds back out, and an offset account uses your own linked savings — either way it's effectively your own money at your home-loan rate, which makes it the cheapest source. The limit is how far ahead you are; beyond that you'd look at a top-up or another option.
How much can I borrow for a renovation?
For secured options it comes down to your available equity — lenders typically allow borrowing up to around 80% of the property's value before lenders' mortgage insurance — plus your income and existing commitments. Unsecured personal loans are assessed on income and credit rather than equity. We'll give you a realistic figure once we understand your situation; the panel of 50 lenders on our books each assess this differently.
Will renovating add value to my home?
Some of it usually does, but not all — and rarely dollar for dollar. Functional improvements like a well-judged kitchen or bathroom tend to return more than luxury finishes, and spending far above what your street supports risks over-capitalising. It's worth separating the value-adding parts from the purely-for-you parts and choosing finance to suit. Property value depends on the home and market, so consider getting your own professional advice.
Planning a reno? Let's find the finance that fits.
Tell us the job and roughly the budget — we'll compare the options across our panel of 50 lenders and show you which one costs the least over time for your situation. No credit check to start.
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