Best Home Renovation Loans

Find the right home renovation loan to make your improvement plans cost-effective with our tips, best lenders and must-know facts

Updated 23 July 2020

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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.

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MoneyHub's Top 3 Renovation Loans - Avoid high interest rates and high fees with our top three trusted lenders.

• Our research highlighted three leading home renovation loan providers that reliably and consistently offer fair interest rates to the majority of homeowners.
• We suggest contacting Harmoney, Co-operative Bank and Lending Crowd (in that order) to see what interest rate they will offer. Harmoney and the Co-operative Bank both offer unsecured loans, where as Lending Crowd only offers secured loans. In most cases, security will usually be placed over an asset such as a vehicle (and not your home).
• Applying takes only a few minutes for each site. There is no obligation to accept any loan offer.
• The more you compare (without paying any application fee), the better chances you have of finding the best deal. 
• Remember, its the interest rate you agree to now that makes a huge difference when you make to repay the loan week after week alongside any mortgage.

Harmoney loans

Co-operative Bank

Lending Crowd

What is a Home Renovation Loan?

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.

Home Renovation Loans vs Borrowing on an Existing Mortgage

1. If you don’t have a lot of equity in your home, or if you don’t want to pledge your home as security for a home renovation loan, borrowing on your existing home mortgage is unlikely to fit your needs.
2. A home renovation loan sits outside of your home loan but is likely to charge a higher interest rate.
3. For example, while banks such as ANZ and Westpac charge around 3% or 4% p.a. for a mortgage, their home renovation loan is between 12% and 14% p.a. This means you’ll pay three to four times the interest rate as well as loan establishment fees.
4. You'll then repay your home renovation loan alongside your scheduled mortgage repayments. Repaying a home renovation loan is like repaying any personal loan; you’ll need to make fixed repayments over an agreed period. You may also overpay to reduce the interest costs – if this is likely to be a possibility, check the loan allows early repayments without penalty.

Do home improvements increase the value of a home?

• It depends – there is no proven formula, but useful renovations are more likely to benefit the resale value. Most people undertaking home improvements do so to improve the aesthetics, liveability and safety of their home.
• However, particular renovations outweigh others on resale. For example, adding another bedroom or installing a self-contained flat outweighs a bathroom or kitchen renovation.
• If you’re looking to spend a more modest amount, repainting with neutral colours can be beneficial for resale.
• The main barrier to home improvements is arranging the finance, and overpaying for a loan can make any works undertaken poor value for money.

Five Must-Know Home Renovation Loan Facts

The interest rate offered may be much higher than you expect

As the loan is unsecured, there is a higher risk of default. This means that you’ll pay considerably more than any existing mortgage lending. 

Comparing lenders’ interest rates is essential to reducing your total renovation costs

The cost of financing should be compared just like the costs of any renovation’s materials, contractor fees and fittings. Even a 2% p.a. difference in the interest rate can mean a 10% difference over five years; for a $50,000 loan, this can mean overpaying as much as $5,000. Comparing offers from trusted lenders is the best way to ensure as much of your money as possible is spent on the renovation and not the financing.  

Home loan amounts are limited to $40,000 or $50,000

If you think your renovation project will cost more than this amount, you may want to consider part-funding it yourself as part of the loan. Few lenders will offer more than $50,000 for a renovation loan. 

The loan repayment term is considerably shorter than home loans

Just like personal loans, home renovation loans usually have a maximum repayment term of five years. The longer the repayment term, the more you’ll pay in terms of total interest costs. Our renovation loan calculator demonstrates this. 

Will a personal loan affect my credit rating? What happens if I can’t repay my personal loan?

Renovations may cost more than you think
The amount you’ll need to borrow varies based on your plans, home size and location. To understand the costs involved with standard renovations, we’ve listed some typical projects and their estimated cost ranges:

Renovation Type Price Range:

• Kitchen or Bathroom Renovation $15,000 – $40,000+
• Bedroom Renovation $1,000 – $40,000+
• House Extension $50,000 – $200,000+
• Re-roofing $10,000 – $45,000+

Next Steps: What do I need to do before applying for a renovation loan?

​​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.

The Best Home Renovation Loans Available Right Now in New Zealand

Home Renovation Loan Size	Cheapest Home Renovation Loans ​Lender and representative interest rates for borrowing over 1-5 years (unless stated)
$2,000 to $15,000	Unsecured Loans Harmoney from 6.99% p.a with a one-off $200 fee (loans below $5,000) or $450 fee (loans above $5,000) ​The Co-operative Bank from 6.99% p.a. with a one-off $200 fee ​Squirrel Money from 7.95% p.a with a one-off $250 fee NZCU Baywide from 10.90% p.a. with a one-off $250 fee TSB Bank from 12.95% p.a. with a one-off $150 fee Secured Loans Lending Crowd from 6.49% with a one-off fee of $250 (loans below $5,000) or $350 fee (loans between $5,001 and $15,000) NZCU Baywide from 9.90% p.a. with a one-off $250 fee NZCU South from 9.90% p.a. with a one-off $250 fee ​
$15,001 to $50,000	Unsecured Loans Harmoney from 6.99% p.a with a one-off $450 fee (for loans above $5,000) The Co-operative Bank from 6.99% p.a. with a one-off $200 fee ​Squirrel Money from 7.95% p.a with a one-off $250 fee NZCU Baywide from 10.90% p.a. with a one-off $250 fee TSB Bank from 12.95% p.a. with a one-off $150 fee Secured Loans Lending Crowd from 6.49% with a one-off fee of $450 (loans between $15,001 - $50,000) NZCU Baywide from 9.90% p.a. with a one-off $250 fee NZCU South from 9.90% p.a. with a one-off $250 fee​

Considering a non-bank lender? Please read our dedicated Harmoney review and Squirrel Money and Lending Crowd guides for information about borrowing.

Home Renovation Loan Alternatives

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.

Home Renovation Loans - Our View

1. Compare lenders to avoid overpaying on interest rates. While a home renovation loan is likely to be for a maximum of five years, a 1% or 2% difference in annual interest rate will still make a difference on the overall cost of the loan. 
2. Borrowing for a shorter period saves you hundreds if not thousands in interest costs. Use our home renovation loan calculator to see the difference.
3. Do not rush into getting a home renovation loan until you know exactly what the cost of the work will be. There's no point applying for a loan that is too small as you'll be unable to finance the completion of the work.
4. If you do struggle with repayments, any late payment or default will be added to your credit report and ultimately affect your credit score. Unless the loan is secured against your home, your home won't be repossessed.
5. If your renovation plans are not extensive, using a credit cards may be the best place to start. If your renovation costs primarily involve retail stores, consider using a long-term finance option such as Q Card or GEM Visa. Many retailers offer a long-term interest-free deal which is effectively a free loan if you make the repayments before they fall due.

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MoneyHub's Top 3 Renovation Loans - Avoid high interest rates and high fees with our top three trusted lenders.

• Our research highlighted three leading home renovation loan providers that reliably and consistently offer fair interest rates to the majority of homeowners.
• We suggest contacting Harmoney, Co-operative Bank and Lending Crowd (in that order) to see what interest rate they will offer. Harmoney and the Co-operative Bank both offer unsecured loans, where as Lending Crowd only offers secured loans. In most cases, security will usually be placed over an asset such as a vehicle (and not your home).
• Applying takes only a few minutes for each site. There is no obligation to accept any loan offer.
• The more you compare (without paying any application fee), the better chances you have of finding the best deal. 
• Remember, its the interest rate you agree to now that makes a huge difference when you make to repay the loan week after week alongside any mortgage.

Harmoney loans

Co-operative Bank

Lending Crowd

Related guides

• Our home renovation loan calculator outlines the repayment costs of any renovation project. 
• Know how to boost your credit score to get the best home renovation interest rate and bring down your overall renovation costs.
• Our bathroom renovations guide explains must-know costs, how to get quotes, renovation facts and tips covers what matters.
• Our Harmoney review outlines this alternative lender.​