Renovation lending: How to finance your home makeover

Use equity from your property

Equity is the difference between the bank’s valuation of your house and the amount you owe on the loan. It can build up over time because either your home value has risen or you’ve reduced your loan balance.

Eligible NAB customers can access their home’s equity to support their renovation plans. To get an idea of how much equity you have available, use our home equity calculator. To tap into your home’s equity, speak to us about topping up your home loan.

Considerations for using equity

• Check how much equity you have built up as this will decide how much you can borrow..
• Compare the interest rates and terms of a home equity loan or line of credit with other financing options to ensure you’re getting a good deal.
• By accessing your home’s equity, your loan balance will also go up, which means higher monthly repayments to cover the additional borrowed amount.
• It’s worth evaluating if a renovation will boost your home’s market value.

Use redraw (if available)

Redrawing from your home loan for renovations may be another option, but it depends on how much you have available to redraw. Not all loans have a redraw option; they’re available on our basic variable rate and variable rate with offset home loans but not our fixed rate loans. See how much you can redraw using internet banking.

Considerations for using redraw

• Start by making sure you understand how much extra money you’ve paid into your mortgage and how much is available for redraw.
• If you choose this option, it’s worth keeping in mind that the balance on your loan will increase and you may end up paying more interest over time
• Ensure that using redraw fits your broader financial plan and you’re able to handle the new repayment schedule comfortably. 

Refinance your existing home loan

Refinancing your existing home loan can give you extra funds for your renovations. A refinance might involve moving your home loan to NAB from another lender. Alternatively, you may already have a NAB home loan but wish to change its terms, say from fixed to variable rate.

Considerations for refinancing your loan

• Look at the current interest rates and check if refinancing can get you a better deal than your existing loan.
• Check if there are any fees and costs associated with refinancing, as these can add up.
• Consider if refinancing will impact your loan term and monthly payments.

Refinancing your home loan can also include debt consolidation. You could reduce your costs by putting all your debts, including credit cards and personal loans, into one repayment. Learn more about how debt consolidation works and explore if a personal loan for debt consolidation is right for you.

Use a personal home renovation loan

A renovation loan, also known as a home remodel loan, is a financial product designed to help you fund the costs associated with updating, remodelling or improving your home. From repairs to decorative upgrades, a renovation loan can help cover the costs. You’ll be able to spread out your payments over time, which means you don’t have to drain your savings or rack up credit card debt. 

If you’re in the market for a renovation loan, consider NAB’s Personal loan for a home renovation. They’re great to get smaller renovations underway, and you can apply for the loan once you have an estimated project cost. We offer personal loans from $5,000, and the funds are deposited as a lump sum directly into your account.

Considerations for a renovation loan

• Interest rates on personal loans are higher than home loans because they’re unsecured credit.
• The maximum loan term for a personal loan is seven years. So, even though the interest rate is higher, the interest charged over the life of the loan will be lower.
• Also, be aware that your personal loan repayments will be higher than a home loan because the loan term is shorter.

Use a building and construction loan

If you've decided to renovate your home, a building and construction loan (BICOE) could be the way to go.  You’ll be allowed to drawdown on your loan as needed, which means a portion of your loan is released at each stage of construction. This can help you manage your cashflow during a big project and you’ll pay less interest than if you borrowed the entire amount up front. Your Guide to Building and Renovating (PDF, 257KB) walks you through the construction home loan process.

 Eligible owner occupiers can also apply for an Australian HomeBuilder grant to substantially renovate an existing home. Check if you meet the eligibility criteria, opens in new window.

Considerations for a construction and building loan

• As you draw down more of your loan, the amount of interest you pay will start increasing. Remember to budget accordingly.
• Since funds are released in stages, you’ll need to manage the project timeline carefully.
• Be sure to factor in additional costs like permits and inspections that may come up during a renovation.