Refinancing to Fund a Renovation
Home renovations are the most common reason Sydney homeowners access equity — and one of the most financially sound uses of home equity when done correctly. Borrowing at home loan rates (6–7%) to fund a renovation that adds more value than it costs is a genuine wealth-building strategy. Doing it with personal loan or credit card finance at 12–20% is significantly more expensive and erodes the return on investment.
The question I always ask clients before recommending renovation finance is: what's the renovation doing to the property value? A $120,000 kitchen and bathroom renovation on a $1.4M Sydney home that adds $200,000 in value is excellent use of equity. The same renovation on a property that's already fully renovated in its price bracket may not stack up. Understanding the value impact before borrowing is important — not just the renovation cost.
Renovation Finance Options
Equity Release (Refinance)
Access existing equity as a lump sum or staged drawdown facility. Best for larger renovations ($80,000+) where the equity is available. Interest at home loan rates — the cheapest option. The renovation doesn't need to be complete before funds are available (unlike a construction loan).
Construction Loan (for Major Rebuilds)
If the renovation involves structural work that's equivalent to a new build — knockdown rebuild, major extension — a construction loan with progress draws may be more appropriate. Interest only on drawn funds during construction. See our construction loans page for detail.
Personal Loan (Small Renovations)
For small renovations under $30,000 with limited equity available, a personal loan may be more efficient than refinancing — lower setup cost and faster access. Rates are higher but the term is short. We compare both options for every client.
Worked Example: Kitchen & Bathroom Renovation in Sydney
- Home value: $1,350,000 | Existing mortgage: $580,000
- Usable equity (80% LVR): $1,080,000 − $580,000 = $500,000
- Renovation budget: $145,000
- New total loan: $725,000 (54% LVR)
- Interest on $145K at 6.49% (IO): ~$785/month
- Personal loan alternative ($145K, 11%, 5yr): ~$3,150/month
- Monthly saving: ~$2,365
- Estimated value uplift post-renovation: $180,000–$220,000
- Net equity gain: $35,000–$75,000 (uplift minus renovation cost)
Renovations with the Best Return in Sydney
- Kitchen renovation: Returns 70–90 cents per dollar in typical Sydney markets
- Bathroom update: 60–80 cents per dollar — strong return for relatively low cost
- Additional bedroom/bathroom: Often returns well above cost in family suburbs
- Outdoor entertaining: High value in Sydney's lifestyle market
- Cosmetic updates (paint, flooring): Highest ROI — lowest cost, significant presentation improvement
Post-Renovation Valuation
Once a renovation is complete, an updated valuation may increase your property's assessed value — potentially releasing additional equity or improving your LVR position. Some lenders allow a desktop valuation update; others require a full valuation. If the renovation adds significant value, a post-completion review with us is worthwhile.