Australians are continuing to invest heavily in improving their homes, with homeowners spending $2.84 billion on renovations in the June 2024 quarter alone, according to the Australian Bureau of Statistics. Projects like modern kitchens and updated bathrooms can add comfort, functionality and long-term value, but they require careful financial planning.
If you’re considering a renovation, refinancing your home loan could be one of the most cost-effective ways to make it happen. By unlocking the equity you’ve already built in your property, you can fund improvements without taking on high-interest personal loans or credit card debt.
Why Refinancing for Renovations Can Make Sense
Interest rates have shifted significantly in recent years, and as the Reserve Bank of Australia continues to adjust its cash rate, many borrowers are reassessing their current loans. In fact, recent data from Equifax shows that refinancing accounted for 37% of all mortgage demand in March 2025, following a rate cut earlier in the year.
When done strategically, refinancing can help you:
- Access funds for renovations by releasing home equity.
- Secure a lower rate if market conditions or your credit profile have improved.
- Consolidate debt to simplify repayments and reduce total interest paid.
However, before you switch loans, it’s essential to review your financial position and ensure refinancing aligns with your broader goals.
Three Common Ways to Fund Renovations
If you’re planning an upgrade, there are several practical ways to finance your project:
1. Refinance with a Construction Loan
A construction loan releases funds progressively as work is completed, so you only pay interest on what you’ve drawn. It starts as an interest-only loan during construction and converts to a standard principal-and-interest structure once the project is finished.
2. Take Out a Personal Loan
This can be a faster option with less documentation, but personal loans typically have higher interest rates than home loans. They may suit smaller renovation projects or quick cosmetic upgrades.
3. Pay in Cash (If Possible)
Paying upfront can simplify the process and eliminate interest costs, though few homeowners can fully self-fund major works.
Avoid using credit cards for renovation costs. Their high interest rates can quickly turn a project into a long-term debt burden.
What to Consider Before Refinancing for Renovations
Before making the switch, take time to assess your options. Here are three key considerations:
- Review your financial position and ensure your income, credit score, and equity levels are strong enough to qualify for a new loan.
- Do a cost-benefit analysis by weighing the potential savings against discharge, application, and possible break fees.
- Look beyond the rate, as the best deal isn’t always the cheapest rate. Loan features, flexibility, and offset options can have a big impact over time.
By evaluating these factors, you’ll have a clearer picture of whether refinancing truly supports your renovation plans.
At Peel Finance Brokers, we work with a wide range of lenders to help you compare your refinancing and renovation loan options. Our team can assess your current position, explore available offers, and guide you toward a structure that supports your long-term financial goals.
If you’re planning to upgrade your home, get in touch today. We’ll help you unlock the best way to fund your renovations and make your next project a success.
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Dip. of Management (Deacon University)
Dip. of Finance/Mortgage Broking Mgt.
Assoc. Cert. of Business (Real Estate)
Assoc. of Mort. Ind. Assoc. of Aust. (AMIAA)
Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.