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Renovation loans Australia
Like just about everything else, the cost of building has gone through the roof. It means doing even a small home reno can require a significant investment.
According to Money.com.au personal loan data, borrowers looking for a personal loan for a home renovation requested an average loan amount of $24,333 in 2023. That's the highest average loan amount for any personal loan purpose, our analysis shows.
Of course, there are a few ways you can organise finance for a home renovation. Each has its pros, cons and varying costs.
In this guide I’ll share insider tips on renovation loan options and the process of budgeting and paying for a home reno.
Everything you need to know about renovation loans in 60 seconds
First up, here’s a brief overview.
Renovation loan options
- Personal loan for renovation: generally used for smaller projects up to $50,000.
- Construction loan: generally used for large renovations or rebuilds over $150,000.
- Home equity loan: generally used for larger renos. The amount you can borrow will depend on the balance of your existing mortgage and your home’s value.
Where to get finance
- Personal loan lender: usually fast approval, tailored products, competitive rates.
- A bank or credit union: access to construction loans and equity loans but application and approval can be slower.
Budgeting tips
- Get multiple quotes on your project and add 10-20% as a buffer.
- Plan out the project fully, including costs, before applying for finance.
In reno terms, think of that overview as a quick lick of paint to get you started.
Now let’s really get into it.
How do home renovation loans work?
A home renovation loan is a personal loan you can use to fund improvements to your home.
Here’s how they usually work:
- Borrow up to $50,000 (or $100,000 with a secured loan)
- Loan term between 1 and 7 years
- Usually an unsecured personal loan but secured options are available
- Can be a fixed or variable interest rate
- Can be refinanced to a lower rate later on
Cheapest home improvement loan interest rates
Currently, the lowest rate home improvement loan has an advertised fixed rate starting at 6.57% p.a. (comparison rate* 6.57% p.a.) for an unsecured loan.
But this is the lowest advertised renovation loan rate. For a lot of borrowers, the actual rate will be higher. In fact, Money.com.au data shows that the average interest rate on a home renovation loan in 2023 is 11.47% p.a.
You see, your interest rate will depend on factors specific to you. Your credit score is a big one.
The table below gives an idea of weekly renovation loan repayments based on different interest rates.
Best renovation loan interest rate comparison
Compare a selection of personal loan interest rates in Australia, with ranges based on the borrower's credit score and other factors. As you can see, the difference between a lender’s lowest and highest rate can be massive. This is why it's important to get personalised quotes from multiple lenders. The table is sorted by lowest comparison rate.
Harmoney | |
|---|---|
| Personal loan interest rate | 5.76% p.a. to 24.03% p.a. |
| Comparison rate* | 6.55% p.a. to 24.98% p.a. |
Plenti | |
| Personal loan interest rate | 6.57% p.a. to 24.09% p.a. |
| Comparison rate* | 6.57% p.a. to 26.28% p.a. |
NOW Finance | |
| Personal loan interest rate | 6.75% p.a. to 26.95% p.a. |
| Comparison rate* | 6.75% p.a. to 26.95% p.a. |
Pepper Money | |
| Personal loan interest rate | 6.75% p.a. to 26.95% p.a. |
| Comparison rate* | 6.75% p.a. to 26.95% p.a. |
ING | |
| Personal loan interest rate | 6.89% p.a. to 18.99% p.a. |
| Comparison rate* | 7.10% p.a. to 19.23% p.a. |
Our Money Market | |
| Personal loan interest rate | 6.57% p.a. to 18.99% p.a. |
| Comparison rate* | 7.19% p.a. to 21.78% p.a. |
Moneyplace | |
| Personal loan interest rate | 7.24% p.a. to 19.99% p.a. |
| Comparison rate* | 7.24% p.a. to 21.49% p.a. |
Liberty Financial | |
| Personal loan interest rate | 7.24% p.a. to 19.99% p.a. |
| Comparison rate* | 7.24% p.a. to 21.49% p.a. |
Bank of Melbourne | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
BankSA | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
St.George Bank | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
Great Southern Bank | |
| Personal loan interest rate | 7.49% p.a. to 19.99% p.a. |
| Comparison rate* | 7.74 % p.a. to 20.27% p.a. |
NAB | |
| Personal loan interest rate | 6.99% p.a. to 20.49% p.a. |
| Comparison rate* | 7.91% p.a. to 21.33% p.a. |
ANZ | |
| Personal loan interest rate | 7.49% p.a. to 19.99% p.a. |
| Comparison rate* | 8.18% p.a. to 20.58% p.a. |
G&C Mutual Bank | |
| Personal loan interest rate | 7.99% p.a. to 16.99% p.a. |
| Comparison rate* | 8.20% p.a. to 17.22% p.a. |
Society One | |
| Personal loan interest rate | 8.20% p.a. to 24.89% p.a. |
| Comparison rate* | 8.27% p.a. to 25.64% p.a. |
Westpac | |
| Personal loan interest rate | 7.99% p.a. to 20.49% p.a. |
| Comparison rate* | 9.18% p.a. to 21.61% p.a. |
Wisr | |
| Personal loan interest rate | 9.04% p.a. to 23.79% p.a. |
| Comparison rate* | 9.88% p.a. to 24.56% p.a. |
Commbank | |
| Personal loan interest rate | 8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable) |
| Comparison rate* | 9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable) |
MoneyMe | |
| Personal loan interest rate | 9.20% p.a. to 25.20% p.a. |
| Comparison rate* | 10.58% p.a. to 26.58% p.a. |
Latitude Financial | |
| Personal loan interest rate | 9.49% p.a. to 29.99% p.a. |
| Comparison rate* | 10.93% p.a. to 31.83% p.a |
Fair Go Finance | |
| Personal loan interest rate | 21.90% p.a. to 25.90% |
| Comparison rate* | 27.54% p.a. to 33.80% p.a. |
Jacaranda Finance | |
| Personal loan interest rate | 17.95% p.a. to 24.95% p.a. |
| Comparison rate* | 32.40% p.a. to 39.63% p.a. |
| Personal loan interest rate | Comparison rate* | |
|---|---|---|
Harmoney | 5.76% p.a. to 24.03% p.a. | 6.55% p.a. to 24.98% p.a. |
Plenti | 6.57% p.a. to 24.09% p.a. | 6.57% p.a. to 26.28% p.a. |
NOW Finance | 6.75% p.a. to 26.95% p.a. | 6.75% p.a. to 26.95% p.a. |
Pepper Money | 6.75% p.a. to 26.95% p.a. | 6.75% p.a. to 26.95% p.a. |
ING | 6.89% p.a. to 18.99% p.a. | 7.10% p.a. to 19.23% p.a. |
Our Money Market | 6.57% p.a. to 18.99% p.a. | 7.19% p.a. to 21.78% p.a. |
Moneyplace | 7.24% p.a. to 19.99% p.a. | 7.24% p.a. to 21.49% p.a. |
Liberty Financial | 7.24% p.a. to 19.99% p.a. | 7.24% p.a. to 21.49% p.a. |
Bank of Melbourne | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
BankSA | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
St.George Bank | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
Great Southern Bank | 7.49% p.a. to 19.99% p.a. | 7.74 % p.a. to 20.27% p.a. |
NAB | 6.99% p.a. to 20.49% p.a. | 7.91% p.a. to 21.33% p.a. |
ANZ | 7.49% p.a. to 19.99% p.a. | 8.18% p.a. to 20.58% p.a. |
G&C Mutual Bank | 7.99% p.a. to 16.99% p.a. | 8.20% p.a. to 17.22% p.a. |
Society One | 8.20% p.a. to 24.89% p.a. | 8.27% p.a. to 25.64% p.a. |
Westpac | 7.99% p.a. to 20.49% p.a. | 9.18% p.a. to 21.61% p.a. |
Wisr | 9.04% p.a. to 23.79% p.a. | 9.88% p.a. to 24.56% p.a. |
Commbank | 8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable) | 9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable) |
MoneyMe | 9.20% p.a. to 25.20% p.a. | 10.58% p.a. to 26.58% p.a. |
Latitude Financial | 9.49% p.a. to 29.99% p.a. | 10.93% p.a. to 31.83% p.a |
Fair Go Finance | 21.90% p.a. to 25.90% | 27.54% p.a. to 33.80% p.a. |
Jacaranda Finance | 17.95% p.a. to 24.95% p.a. | 32.40% p.a. to 39.63% p.a. |
Get your personalised home reno loan rates
See what renovation loan rates you actually qualify for by comparing multiple lenders at once.
GET STARTEDGET STARTEDEligibility for home renovation loans
Different lenders treat risk differently, meaning every home renovation loan has its own eligibility criteria.
But these are the most basic qualifying criteria pretty much all lenders look for:
- Over the age of 18; and
- An Australian citizen or permanent resident; and
- Employed, with a regular source of income
When assessing your application, lenders will also want to verify that you'll be able to afford the repayments. To do this, they’ll consider:
- Your credit history and score
- Your income level
- Your regular expenses
- Other debts you have (tip: they’ll look at credit limits, not the balance, on credit cards)
- Assets you own (car, shares etc.)
- How many dependents you have
These factors typically also determine the interest rate you get on your home improvement loan, plus how much you can borrow. For example, bad credit borrowers may need to look at tailored options.
How to apply for a home renovation loan
You can apply for a home renovation loan online in a few minutes. Knowing how home renovations can go, it may be one of the easier aspects of the project.
Here’s how to do it in 5 steps:
- Compare loan options
- Make an application with your chosen lender
- Supply any supporting documents the lender requests (usually payslips and bank statements)
- If it’s a secured loan you’ll need to provide information about the asset being used
- If you’re approved, the lender will pay the funds to your bank account
The whole process can be completed in a couple of days from start to finish, although it may be longer for some people, like self-employed borrowers applying for a low doc loan.
How can I find the best home renovation loan?
Just like you would when choosing a builder, it’s a good idea to compare multiple home renovation loan deals before committing.
In particular, be sure to compare the interest rates, plus the fees you’ll be charged on the loan.
These two factors will be combined in the loan’s comparison rate.
Then, based on the term (duration) of our loan, you’ll be able to compare options based on the overall cost calculation.
But don’t stop there. Look at repayment flexibility too and whether you will have the option to repay the loan early without penalty.
Finding a low cost renovation loan that you can repay early could shave thousands off the overall cost of your reno.
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Advantages of renovating with a personal loan
To summarise, here are some of the reasons people decide to fund their renovation with a personal loan.
- Generally simple and quick to apply for
- Shorter term than other options
- You won’t need a builder’s contract or valuation to get approval
- Total flexibility to use the funds as you like
- Options specific to certain projects, like putting in a pool
Disadvantages of renovating with a personal loan
But make sure you consider the potential downsides of a home renovation personal loan too.
- Higher interest rates than other finance options
- Limited to small renovations
Now let’s compare home renovation personal loans to the other main finance options.
Using a construction loan for renovations
Construction loans are designed for building or substantially renovating a home. Generally they’re used on building projects with valued over $150,000.
To be approved you’ll usually need a signed all-inclusive contract with a builder, including a fixed price quote and plans.
Construction loans are structured differently too. After the lender approves your application, they will generally pay out funds in stages as the construction progresses.
Construction loan repayments
During construction your repayments will generally only cover the interest on the loan. This means your repayments will be lower while the project is underway.
Once it’s complete you’ll return to normal repayments of principal and interest.
Pros of construction loans
- Higher loan limit designed specifically for large renovations
- Interest-only during the construction period to keep repayments low at that stage
Cons of construction loans
- Much more complicated application process
- Not flexible once the loan is approved
Using your mortgage equity to renovate
If you have a home loan, you may be able to refinance it to fund your renovations. Essentially you’re borrowing against the value of your property.
To do this, your lender will need to revalue your property. The home equity borrowing process is unlikely to be as complex as taking out a home loan from scratch, but it can still be a lengthy process.
You’re also adding to your mortgage, which will either mean needing to extend the loan term, or increase your repayments.
Either way the cost will be spread out over a long period of time. This can make it an expensive way to pay for a renovation.
$30,000 personal loan vs home loan renovations cost comparison
| Type of loan | Interest Rate | Length | Monthly Payments | Total Interest Cost |
|---|---|---|---|---|
Personal Loan | 8% | 5 years | $608 | $6,498 |
Home Loan | 5% | 25 years | $175 | $22,613 |
Renovation loan comparison: Which option is best?
| Personal loan | Construction loan | Home equity | |
|---|---|---|---|
Amount available | Up to $100,00 | $150,000+ | Depends on borrower’s circumstances |
Interest rates | Starting from 7% | Starting from 6% | Starting from 5% |
Loan term | Up to 7 years | Up to 30 years | Up to 30 years |
Property valuation required | No | Yes | Yes |
Lender requires building contract | No | Yes | No |
Security required | Optional | Yes | Yes |
Tips for planning and budgeting for your home reno
Evaluating your project in detail in advance can help make things run smoothly. It can also help you decide on the type of renovation loan that may suit best.
Here are some tips to consider:
- Be realistic about the cost of your renovations and what you can afford
- Get multiple quotes on the total project cost before committing to a renovation loan
- Add around 10-20% to the total estimated cost as a buffer
- Factor in non-building costs, like temporary accommodation if you need it while your home is under construction
- Make sure you secure the finance before you commit to the project
Renovating cost guide - what can you afford?
| Area | Average price | Costs |
|---|---|---|
Kitchen | $10,000 - $45,000 | Labour, appliances, fittings, flooring, structural changes |
Bathroom | $10,000 - $35,000 | Labour, tiling, fixtures |
Bedroom | $2,000 - $35,000 | Labour, structural changes, furniture |
Living Room | $10,000 - $15,000 | Labour, flooring, furniture |
Outdoor | $2,000 - $10,000 | Labour, landscaping, structural changes |
Renovation Loan FAQs
Get help from a real-life Money Matchmaker® from start to finish.
What’s the best way to fund renovations?
Construction loans may be suited to large, high-cost renovations, while personal loans may be better for smaller, low-cost renovations.
Can I get a construction loan for renovations?
Yes, you may be able to get a construction loan to renovate your home. However, you’ll need to supply your lender with a deposit of 5% or more, a signed building contract and quotes, as well as meeting their credit criteria.
Can I pay for renovations with my existing home loan?
Yes it's often possible to increase your home loan amount to finance a renovation, particularly if your home has increased in value. This is known as an equity release and involves refinancing your home loan.
You may also be able to open a line of credit without refinancing your home loan. Speak to your lender to find out more.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
Personal Loans guides and resources
The great thing about personal loans is they can fund almost anything. They are perfect when you need that bit extra to cover expenses, start a project or reset your finances to get back on track.
AS FEATURED IN
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
