26 May 2025 Planning a Home Makeover? How to Finance It with Renovation Loans
Melbourne homeowners are increasingly turning to home makeovers to refresh their spaces and boost property value. From a fresh coat of paint to a complete home overhaul, more and more people are embracing the idea of improving their homes to match their evolving lifestyle and aesthetic needs.
But here’s the thing: no matter the size of your renovation project, financing it can be tricky.
That’s where renovation loans step in. They’re a practical financing option that can help cover everything from minor renovations to major building projects, so you don’t have to dip into your savings or rely on credit cards.
In this guide, we’ll walk you through everything you need to know about using renovation loans for your Melbourne home makeover.
Planning a home makeover? Chat with our Melbourne mortgage brokers at EverLend to explore your renovation loan options. Call us at 03 7036 3356 today!
What Are Renovation Loans?
Renovation loans are a financial product designed to help homeowners fund home improvement projects. They allow you to borrow the money you need to cover the costs of your renovation goals, whether you’re planning a minor refresh or a major building project.
These loans are different from standard home loans because they focus specifically on home upgrades, giving you the financial support to complete your dream renovation. By spreading out your repayments over a set period of time, they help you manage cash flow and maintain your financial health while turning your plans into reality.
Advantages of Renovation Loans for Homeowners
Before diving into the nuts and bolts of how these loans work, it’s helpful to understand why so many homeowners are choosing them over other finance options.
- Flexible Use of Funds: You can use them for everything from minor renovations to complete home makeovers.
- Protect Your Savings: Instead of using your savings or credit cards, renovation loans provide a clear structure for funding your project.
- Manageable Repayment Terms: These loans come with flexible repayment terms and monthly payments that fit your budget.
- Boost Your Property Value: A well-planned renovation can increase your home’s value and give you a return on investment down the track.
Types of Renovation Loans
Melbourne homeowners have a wide range of renovation loan options to suit their plans and unique circumstances. Let’s break down the most popular types of renovation loans and helpful features that might be available.
Home Equity Loan
This loan uses the equity you’ve already built up in your home as security. It’s ideal for larger renovations where you need a significant amount of funds upfront.
Construction Loan
A construction loan releases funds in progress payments that match your building progress. It’s perfect for major projects or when working with a licensed builder.
Personal Loan for Renovation
Personal loans are unsecured and provide fast access to funds for smaller renovation projects. They’re a handy option if you don’t want to tie your home to the loan.
Line of Credit
A line of credit offers flexible access to funds, letting you borrow only what you need as your project moves along. It’s great for ongoing or multiple small renovations.
Redraw Facility
A redraw facility lets you access extra repayments you’ve already made on your home loan. It’s a simple way to cover renovation costs without opening a new loan account.
Offset Account
An offset account links your savings to your home loan and reduces the interest you pay. You can draw from these savings to fund your renovation while keeping your loan balance lower.
Green Home Loan
Green home loans offer incentives or lower interest rates for environmentally friendly upgrades. They’re a popular choice if you’re looking to make your home more energy-efficient or sustainable.
Steps to Apply for Renovation Loans
Applying for a renovation loan might seem daunting, but with a clear plan, it’s easier than you think. Let’s break it down step by step to make the process smooth and stress-free.
1. Check Your Eligibility and Credit Score
Start by reviewing your credit history and credit score; this can help you secure better loan terms and a competitive loan interest rate. If your score needs work, consider boosting it before applying to improve your chances of approval.
2. Choose the Right Type of Loan
Compare different loan types, like secured loans and unsecured loans, based on your renovation project’s needs. Decide if you need a larger loan amount upfront for a major renovation or smaller funds for minor repairs.
3. Find the Best Lender or Mortgage Broker
Working with a mortgage broker can save you time and money by comparing a broad range of loan products. Brokers typically don’t charge a fee, as they’re paid by the lender.
4. Gather Required Documents
You’ll need documents like your building contract, proof of income, bank statements, and identification. These documents help lenders understand your financial circumstances and speed up the application process.
5. Submit the Loan Application
Complete your loan application with all the necessary details. Some lenders charge an application fee of around $150 – $600, so be prepared for that upfront cost.
4. Wait for Credit Assessment and Approval
Lenders will assess your application, credit history, and the building contract. They’ll also check your ability to manage monthly repayments and assess your loan amount upfront.
5. Understand Your Loan Terms and Monthly Repayments
Carefully review the loan terms, including monthly repayments, loan interest rate, and repayment schedule. This ensures you’re clear about how much you’ll pay and for how long.
6. Access Extra Funds if Needed
If unexpected costs come up during the project, many lenders offer access to extra funds through redraw facilities or a line of credit. These features can help you cover extra costs without applying for a new loan.
7. Estimated Costs and Fees
Aside from application fees, expect other possible costs like valuation fees ($200 – $600), settlement fees ($150 – $300), and monthly loan account fees ($10 – $20). Be sure to factor these into your renovation budget to avoid surprises.
Factors to Consider Before Applying for a Renovation Loan
Before you jump into the application process, it’s essential to think through a few key things. Let’s break down the most important factors to help you plan wisely.
- Budget and Project Scope: Have a clear renovation plan and understand the full cost of your project, including construction costs and unexpected expenses.
- Loan Amount and Repayment Terms: Figure out how much you need upfront and how the monthly repayments fit into your financial goals.
- Interest Rates and Fees: Compare loan offers to find a competitive interest rate and understand any extra fees like loan account fees or late payment penalties.
- Impact on Cash Flow: Make sure your loan repayments won’t stretch your budget too thin, especially if you’re managing other financial commitments.
Ready to Transform Your Home?
Connect with EverLend today, and let our expert Melbourne mortgage brokers guide you through the renovation loan application process. Apply now and make your home makeover dreams a reality!
Call us on (03) 9123 4567 or visit www.everlend.com.au to get started today!
Frequently Asked Questions (FAQs)
What is the best way to borrow money for renovations?
The best way to borrow money for renovations is to explore renovation loans with a clear understanding of the eligibility criteria and loan fees. Comparing the comparison rate and loan repayments across different lenders will help you secure the best deal for your project.
Which loan is best for renovation?
The best loan for renovation often depends on whether it’s a larger project or minor updates. For a larger project, a construction loan with a progress payment schedule during the construction period may be ideal, whereas regular home loans might suit smaller renovations.
What is the best way to finance a house renovation?
The best way to finance a house renovation is to choose a loan option that aligns with your construction costs and the entire process. Considering factors like the comparison rate, loan repayments, and chances of loan approval can help ensure you’re getting the most value for your renovation project.
How much deposit do I need for a construction loan in Australia?
For a construction loan in Australia, you typically need a deposit of around 20% of the construction costs. However, the exact amount can vary based on your lender’s eligibility criteria and the size of the entire loan.
Which bank is best for a home renovation loan?
The best bank for a home renovation loan will depend on their loan fees, comparison rate, and how they handle the progress payment schedule during the construction period. Some popular options are CommBank, NAB, and ANZ. It’s wise to compare different banks’ options against traditional home loans to find the one that best suits your entire loan needs.
Final Thoughts
A home makeover in 2025 is the perfect chance to create a space that truly reflects your lifestyle and goals. Renovation loans can help you bring your dream renovation to life without dipping into your savings or maxing out your credit cards.
As experienced mortgage brokers based in St Kilda and working across wider Melbourne, we’re here to make the entire process smoother. Our brokers are here to match you with the best renovation loan for your project.
We’ll compare different loan options, rates, and fees so you get the right fit for your budget. We’ll also help gather the paperwork, explain your monthly repayments, and guide you through the loan application step by step, making the whole process simple and stress-free!
Give us a call on 03 7036 3356 or visit our website at www.everlend.com.au for a free consultation and let’s see how we can help make your renovation dreams a reality!