Home renovation loans

Best used for: home renovations under $50,000

Personal loans can be a simple, straightforward way to fund renovations. You can use the Money.com.au smart form to compare your options for home renovation loans in less than 5 minutes - see how much you can borrow and which lenders you qualify with, completely free of charge.

Home renovation personal loans have shorter terms than a mortgage or larger loan, with terms generally offered between three and seven years. Borrowing limits range from $2,000 to $75,000, and they may also have higher interest rates than home loans and construction loans.

Compare your available options before applying to determine which type of loan is most suitable for your project budget and personal financial circumstances.

Pros:

• Quick, easy application
  

• Simple loan structure
  

• May have low fees
  

Best used for: Large renovations over $150,000

Construction loans are designed to cover the expenses you incur when building or substantially renovating your home. They’re structured a little differently than regular home loans to make the process as simple as possible.

To apply, you’ll usually need a signed all-inclusive contract with a builder, including quotes and plans. After your lender approves your application, they will generally pay out funds in stages as needed to complete the construction. These payments will often be made directly to your builder.

During the building phase, construction loan repayments will generally only require you to cover interest charges, before reverting to a standard principal-and-interest mortgage once construction is complete.

It’s important to note that these loans are not built for small renovations and often have loan minimums of $150,000.

Pros:

• Designed specifically for large renovations
  

• High loan limit ideal for large renovations
  

• Interest-only during the construction period
  

Every lender has different eligibility criteria for a home renovation loan, but most basic qualifying criteria requires you to be:

• Over the age of 18; and
  

• An Australian citizen or permanent resident; and
  

• Employed, with a regular source of income that you can demonstrate
  

The most important factor when gaining approval for a home renovation loan is to demonstrate your ability to repay the full loan amount to your lender.

If you meet the basic eligibility for a personal loan, you will then need to compare lenders and assess their individual approval criteria.

To get apply for a home renovation loan you will need to:

• Submit an application to a lender
  

• Meet the lender’s approval criteria
  

• Sign a loan contract and agree to the terms of the loan
  

You will need to provide personal identification and financial documents (usually your bank statements or recent payslips), as lenders will need to assess your financial stability and determine if you can service the loan amount.

Renovations can be expensive. Before you apply for a loan, estimate the scope of your project and get multiple quotes from various contractors.

• Refinancing and equity release: generally used if you have excess equity in your home.
  

• Personal loan: generally used for small, low- to mid-cost renovations under $50,000.
  

• Construction loan: generally used for large renovations over $150,000 in value.
  

Picking the right option could save you thousands of dollars in interest and fees so before you even pick up a hammer it’s important that you give serious thought to how you’ll fund your renovations.