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Written byShaun McGowan
Before we start assessing your costs, let’s cover off some renovation loan basics.
Renovating is one of the most popular reasons Australians take out a personal loan.
Keep this in mind as we look at estimating the project in the next section.
Now it’s time to estimate your project.
The bad news is that it might cost more than initially expected.
The good news is that everything gets much easier after this point.
Let’s get started with an overview of average renovation costs from Aussie lender, SocietyOne.
$10,000 - $45,000
Labour, appliances, fittings, flooring, structural changes
$10,000 - $35,000
Labour, tiling, fixtures
$2,000 - $35,000
Labour, structural changes
$10,000 - $15,000
Labour, flooring, furniture
$2,000 - $10,000
Labour, landscaping, structural changes
As you can see, costs vary wildly between projects, but it basically comes down to:
If you’re planning on putting in some new tiles and a bath, or build a deck for summer, your project will be pretty simple to scope.
If you’re planning to knock down some walls or build a second storey, then you’ll definitely want to get in a professional to keep you within budget.
Once you’ve settled on the cost of your project, you’ll want to add around 10% to the total costs.
Because life happens sometimes. The best project plan in the world can’t account for an unexpected pandemic, or delayed shipments, broken materials, and any other setback.
Adding 10% gives a little peace of mind that one hurdle doesn’t mean doom for a project.
Evaluating your project should also dictate the type of renovation loan you’ll need:
Personal loans can be a simple, straightforward way to fund renovations.
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.
You can use the Money Matchmaker™ engine to compare your options for home renovation loans in less than 60 seconds.
See how much you can borrow and which lenders you qualify with, completely free of charge.
Construction loans cover expenses 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.
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:
The good news about staged payments is that you’ll generally just cover interest charges.
This means your repayments will be lower while the project is underway, and once it’s complete you’ll return to normal repayments of principal and interest.
If you have a mortgage, you may be able to refinance to fund your renovations.
From a cost perspective, this means your ongoing repayments will be significantly lower, but you’ll pay significantly more interest by the end of your term.
You can see this illustrated in the example below, and it’s something to keep in mind when considering short-term and long-term costs.
|Type of loan||Interest Rate||Length||Monthly Payments||Total Interest Cost|
Every lender has different eligibility criteria for a home renovation loan
The most basic qualifying criteria requires you to be:
The most important factor in applying 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:
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.
Construction loans may be suited to large, high-cost renovations, while personal loans may be better for smaller, low-cost 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 to as well as meeting their credit criteria.
In some cases, you may be able to open a line of credit without refinancing your home loan. Speak to your lender to find out more.
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Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
*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.