Home Renovation Loans in Australia

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Contents

    What is a home renovation loan?

    Remodelling a space in your home can be an exciting way to freshen things up. Unfortunately, dreams often run into reality when the expenses of a prospective renovation start to mount. Taking out a home renovation loan is a smart method to spread out the cost of the project into more manageable pieces. However, you want the loan to make sense financially, which is why it’s helpful to get an in-depth home renovation loan interest rate comparison as well as explore other related factors.

    This loan type provides financing for people planning home improvements. Home renovation loans are available both for those who just bought a new house as well as those who have owned their home for a while. Loans can go as high as $100,000 and the average loan term is from 1 to 7 years.

    To get the best renovation loans in Australia, you have to connect with lenders that can customise the finance arrangement to fit your needs and offer reasonable interest rates.

    What can a home renovation loan be used for?

    Loans in this sphere tend to be flexible and will be issued for a wide variety of projects. To be financially savvy, you have to consider what types of improvements add the most value to your home. This will maximise your returns when you one day sell the property.

    Common uses for a home renovation loan include bathroom and kitchen remodelling, home extensions, repairs, swimming pool installations, landscaping, or even upgrading appliances.

    What are the types of home renovation loans?

    Within the category of home renovation loans, there are several types of financing that can be structured very differently. Understanding the differences is important to make sure you’re getting the best renovation loans in Australia for your particular situation.

    • Personal loans

      A secured personal loan usually offers lower interest rates, but requires collateral. This means you could be putting your home equity on the line. An unsecured personal loan is not bound to any collateral, but this means the interest rates will be higher.

    • Mortgage finance

      Homeowners with an existing mortgage could apply for refinancing to access extra cash for home improvements. If the market has drastically changed since the time when you first signed your mortgage, it may be time to consider home loan refinancing.

    • Construction loans

      This loan type is meant specifically for those building a new home, or engaging in major structural renovations. An additional benefit is that sometimes, you only pay interest on the portion of the loan that you ended up using, rather than the entire original amount.

    • Green loans

      These are personal loans oriented towards sustainable and eco-friendly home upgrades, like solar panels. Green loans often have low rates and flexible repayment terms to encourage more homeowners to make environmentally conscious changes.

    • More loan alternatives

      One option is home equity loans, where you borrow money against the value of the house based on what you’ve already paid. Finally, if you have a sufficiently high credit limit, you can always put home improvement expenses on an ordinary credit card.

    What are the most important parts of a home renovation loan?

    Home renovation loans can be complicated and confusing, making it difficult to pick the right one. A good place to start is a home renovation loan interest rate comparison, but there are many other factors beyond that which you must consider.

    • Comparison rates. This is a more sophisticated variant of the interest rate that you see advertised. Comparison rates account for fees and other charges to give you a truer estimate of the loan cost.

    • Fixed versus variable rates. A fixed rate remains at one level for the entire life of the loan, while variable rates rise and fall with market conditions.

    • Fees and charges.  Loan costs can stack up fast once you add in application fees, establishment fees, monthly account fees, late payment fees, early payment fees, and agreement break fees.

    • Loan term. Personal loans tend to last between 1-7 years. Shorter terms mean you’ll pay less interest overall, but will owe more money on each repayment.

    • Repayment flexibility. The best renovation loans in Australia are consumer-friendly in areas like early break costs, extra repayments, early repayments, and redraw facilities. Also ask if the payment schedule (weekly/fortnightly/monthly) can be adjusted to match when you get your income.

    Home renovation loan FAQ

    How does a bad credit personal loan work?
    This is a loan oriented towards someone with a poor credit history. Bad credit personal loans will have higher interest rates and fees compared to ordinary loans.
    What do I need to apply for a home renovation loan?
    For the application process to begin, you will need several pieces of documentation. These include valid identification, proof of income and ability to pay back the loan, and details about your other debts and financial liabilities.
    Does a renovation loan require a deposit?
    No. There are no down payment requirements for renovation loans, and you can borrow up to 100% the cost of your home improvements.
    Are DIY projects eligible for a home improvement loan?
    Yes, these loans are flexible and can be applied to different types of renovations. The loan can be used for buying tools and materials to do it yourself, or it can be spent on hiring tradies if you need professional assistance.
    What is an offset account?
    This is a type of transaction account that gets linked to your mortgage. Any money in the offset account gets deducted from your loan balance, so interest only accrues on the remaining part of the loan rather than the entire sum.

    Home renovation loan conclusion

    Your home is quite likely the most expensive asset you own, and you have to think strategically about maximising its value while maintaining a pleasant place to live. A home renovation loan serves as a springboard to take your home to the next level without breaking the bank.

    Having a grasp of home improvement loan types and knowing how to tell a good interest rate from a bad one gives you a major advantage as you gear up for your next big project.

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