HOME > BLOG > Renovating and Building > Fund your renovation with your home loan

If you are considering funding your renovation costs using your existing home, there are several important factors you need to consider.


Do you have enough equity?

Home owners who have considerable equity built up in their home are often in a good position to renovate their property. Equity is the difference between what your home is worth and what you owe. For example if you have a home worth $300,000 and you owe $80,000 then you have $220,000 available as equity.  This is a valuable asset as your equity can be used as security to finance your renovation.


Can you afford to repay the higher loan amount?

Depending on your financial situation, some lenders may allow you to top-up your home loan amount to cover the funds of the renovation. However, this will mean that your repayments may increase. If you find that you are just meeting your current repayments, you will need to consider how higher repayments will impact your finances.


Using Existing Redraw for Renovation

One of the great things about a mortgage with free redraw is the ability to pay off extra over a period of time and then use those savings for something major. Home renovation and improvements are often a suitable use for those funds.


However, there are some cautions. If you have an existing line of credit secured against your home and you want to use this for a major structural renovation on the home, you will need to speak to your lender beforehand as your loan agreement may stipulate that you must not carry out structural changes to your home without your lender’s consent.


It may be that your lender will be fine to lend you the money for the renovation, however they may well insist on the loan being a construction loan. This is to protect against the situation where you run out of money half way through the construction process. The lender does not want to be left holding a half completed home.

To get a full picture of all that’s involved, grab a copy of our free eBook, Renovation or Relocation. It goes through the issues involved and helps you work through what you really need. If you have major work to be done, perhaps the simplest thing is to just give us a call here at State Custodians Mortgage Company. We can help you get into a suitable loan to help you accomplish your renovation goals. Phone 13 72 62.