Home Renovation Loans Summary

• A home renovation loan helps you to finance the cost of renovating, remodelling or repairing your home. This guide explains the loan options, expected costs of standard home improvements, and must-know tips about arranging a home renovation loan.
• Banks, credit unions and finance companies all offer home renovation loans. The cheapest option is (usually) to take out money on an existing home mortgage, but this is not always possible. 
• In this guide, we compare home renovation loan offers from a range of lenders, as well as outline alternative financing options. We cover:

1. What is a Home Renovation Loan
2. 5 Must-Know Home Renovation Loan Facts 
3. Best Home Renovation Loan Rates
4. ​Home Renovation Loans - Our View

Know this first:

• Home Renovation Loans are available generally for amounts up to $50,000 - but the interest rates charged vary wildly; the better your credit score and credit history and overall loan affordability, the better deal you'll get. 
• Non-bank lenders such as Harmoney, Squirrel Money and Lending Crowd offer an alternative to traditional banks and finance companies; they only operate online and can beat banks for borrowers with good credit.
• Credit cards may be a suitable alternative for smaller renovation projects, and you may be able to transfer what you "borrow" from the credit card to a 0% interest balance transfer deal. This way you'll avoid interest costs, loan application fees and be debt free faster. 
• If you are looking to take out a loan for redecoration or renovation, providers such as the Q Card and GEM Visa can offer long-term financing at 0% interest rates with minimal fees.
• Borrowing is a serious decision and needs to be carefully planned and budgeted for. This step-by-step guide outlines everything you need to know about getting a home renovation loan and gives tips to make it as cheap and stress-free as possible.
• In the interests of full disclosure, MoneyHub may earn a referral bonus for anyone that’s approved through some of the below links. We publish the best publicly available home renovation loan offers that we can find, irrespective of any pre-existing commercial arrangement.

Are you planning more extensive renovations, i.e. structural changes? This guide is not for you.

• A home loan is more suitable; our guide covers the latest home loan offers. If you already have a home loan, you can ask your bank about a home loan ‘top-up’.
• If approved, you can access a specific amount of money for your structural changes (i.e. an extension, a new roof, electrical wiring or plumbing, work on the foundations, wall removal, etc.).
• Warning: If you don’t repay the home loan, as is the case with any mortgage, the lender can repossess your home.

A home renovation loan is a loan (either secured or unsecured) that is granted for the specific purposes of upgrading, extending or fixing a residential property. Lenders usually provide home renovation loans for up to around $50,000. Interest rates vary considerably, from around 7% to as high as 20%. Banks typically offer interest rates from around 12% to 14%.

Important: Home renovation loans are not secured against your home. For this reason, they operate very similarly to personal loans. The interest rate and loan amount are based on your income and credit history. If you default on a home renovation loan, you will lose whatever security you pledged (if it’s a secured loan) and your credit score will be negatively affected.

​​It’s essential to know the total costs of the work you plan to undertake. This will include:

• Architectural fees
• Consents (if required) from the local council
• A building quote from a construction company or specialist renovator 
• Demolition and disposal costs

Top tip: Make sure your quotes are GST inclusive; as a homeowner, you’ll need to pay the GST (an additional 15% of the quoted cost) which can add up to several thousands of dollars for more extensive renovation projects.

You may not need to apply for a home renovation loan if other (cheaper) options are available. We outline the potential to use a credit card and/or Q Card or GEM Visa; any of these alternatives have the potential to significantly beat the fees and interest charges incurred by a home renovation loan.

Is a credit card or long term finance card better than a home renovation loan?

• The answer is “it depends”. For renovations with budgets of less than $5,000, many cheap credit cards undercut the cheapest loans, so using a credit card to finance your loan should be a priority.
• If you are looking to make a purchase as part of your renovation plans, look at long-term finance deals, as out guides to GEM Visa and Q Card explain. Many retailers offer 6-24 months interest-free, which automatically beat the banks and other lenders. But you'll need to pay it back BEFORE the interest-free period ends to avoid astronomically high 25%+ p.a. interest rates.
• Alternatively, you can consider applying for a low-interest credit card. If approved, you can make the purchases for your home and manage the repayments accordingly.