How to Finance a Home Renovation With No Savings: 6 Ways (2026)

How to finance a home renovation with no savings: 6 ways that work in 2026

You can finance a home renovation with no savings by borrowing against the equity in your home. That means a redraw, a top-up of your current loan, a refinance with cash out, or a construction loan for structural work. If you are buying, or equity is short, the other routes are a renovation component in your purchase loan or a personal loan. A personal loan carries a higher rate but leaves your mortgage alone.

Which one suits you comes down to what the home is worth, what you owe and what the job costs. We have arranged renovation finance since 2001, and almost every one of those conversations starts with the equity sum below.

Start here: how much usable equity do you have?

Equity is the gap between what your home is worth and what you owe. Usable equity is the part a lender will actually let you borrow, and for most borrowers that is capped at 80% of the property’s value, because above 80% lenders mortgage insurance (LMI) usually applies.

The formula is simple: usable equity = (property value x 80%) – current loan balance.

Take a home in Western Sydney valued at $950,000 with $520,000 owing:

That borrower can fund the whole $120,000 renovation without a dollar of savings and still sit comfortably under 80%. Run your own figures through our LVR calculator.

Now a tighter one. A home valued at $700,000 with $530,000 owing has only $30,000 of usable equity ($560,000 less $530,000). A $90,000 kitchen and bathroom job would push the loan to $620,000, an LVR of about 89%. That borrower is into LMI territory. About 20 lenders on our panel will release cash for a non-structural renovation up to 90% LVR with LMI, at a cost, and a couple cap it at 80%. Structural work above 80% is different: most lenders will not release cash for that at all, even with LMI; it needs a construction loan. If not, the realistic options are a smaller first stage, a personal loan for part of the job, or, where the work adds real value, a construction loan valued on the finished home (way 4).

Two things decide whether the equity is real: the lender’s valuation (not the agent’s appraisal) and serviceability. Banks test your whole new loan, not just the extra, at an interest rate at least 3% above the loan’s actual rate, the serviceability buffer APRA sets for the banks it regulates. Plenty of people have the equity and fail on income.

1. Redraw or offset: money you already have in the loan

If you have been paying more than the minimum, the extra sits in your loan as available redraw, and a redraw facility gives you access to that money. No application, no valuation and no credit enquiry. The same goes for cash sitting in an offset account.

It usually costs less than any new borrowing, but it still costs you. Pull $40,000 out of offset and you pay interest on $40,000 more of your loan from that day. Pull it from redraw and your balance goes back up by the same amount.

If you refinance, redraw moved into an offset at the new lender makes the new loan larger on paper, but nothing is lost. Some lenders also limit or charge for redraw, especially on fixed rates, so check before you sign a builder’s quote on the strength of it. Our redraw vs offset guide covers the differences.

2. Top up your existing home loan

A top-up (also called a loan increase or equity release) raises the limit on the loan you already have. It is usually the simplest way to fund a cosmetic renovation such as a kitchen, bathroom or flooring. The lender orders a valuation, reassesses your income and expenses, and releases the extra as a lump sum.

Three things catch people out:

• A fixed rate. At least one major banking group on our panel, across two of its brands, only offers top-ups on variable-rate loans, and breaking a fixed rate early can cost money.
• A family guarantor. At one large bank a loan with a guarantor is ineligible for a top-up until the guarantors are released. The structure that got you into the home can block the renovation.
• Evidence of the spend. Without LMI, lenders on our panel accept a statement of purpose for a cosmetic renovation up to anywhere from about $100,000 to $1 million, depending on the lender, with a few hundred thousand the common point; above their threshold they want quotes. One lender goes to $750,000. With LMI the thresholds drop sharply, several lenders want quotes at any amount, and a couple allow nothing above 80% at all. At least one lender releases the renovation portion only against builder invoices, so an approval is not always access to the money.

We nearly always put the renovation money in its own split rather than blending it into the existing balance. Set repayments on that split as if it were a five- to seven-year loan and it is gone well before the rest of the mortgage. That one habit is the difference between a cheap top-up and one that costs more than a personal loan (comparison below).

The new debt does not even have to sit on the home you are renovating. We had a client with three investment units who wanted about $200,000 to renovate her own home, so we secured the new loan against one unit at roughly 50% LVR. Because the money was going into her own home, the purpose was owner-occupied, which can price better than a straight investment loan even though the security was an investment unit. The real deadline was that she was retiring within months: rent alone would not service the loan, so it had to be written while she was still earning. (If the real problem is space rather than finishes, the same sum can go towards buying a second home with equity instead.)

3. Refinance to a new lender and cash out for the renovation

Yes, you can refinance a home loan to pay for renovations. You move to a new lender, borrow extra on top of the payout figure and receive the difference (the cash out). It makes most sense when your current lender says no or offers less. It also makes sense when your rate has drifted above what new customers are offered, and the renovation is a good excuse to review the whole loan.

What a refinance adds over a top-up:

• A second valuation opinion. Valuations ordered at several lenders at the same time cost nothing through us and can come back materially different. When you are trying to fund a renovation from equity, $30,000 or $40,000 of extra value is $24,000 to $32,000 of extra borrowing at 80%. But be careful asking a lender to upgrade an automated estimate to a desktop valuation: at least one lender on our panel will then use the desktop figure even if it comes back lower.
• A fresh set of policies. A lender that will not release cash for your purpose at 85% LVR may sit next to one that will.
• Costs. Discharge, settlement and registration fees, a possible fixed-rate break cost, and time: plan on several weeks, not days. Our cost of refinancing guide itemises every fee.

Cash-out evidence rules are where lenders differ most. For structural work, or once LMI is needed, most want quotes, a building contract or invoices. At least one lender on our panel will release up to $750,000 for cosmetic and non-structural renovations without quotes, provided the loan needs no LMI. Which camp suits you depends on the size and type of the job. Our refinancing page explains how we compare the 52+ lenders on our panel.

4. A construction loan for structural renovations and extensions

Extensions, second storeys, removing load-bearing walls, granny flats and knock-down rebuilds are structural work. If you have enough equity on today’s value, many lenders will fund structural work as a lump sum. You need a construction loan (sometimes called a renovation construction loan or building loan) when you want the lender to lend against the finished value, or when the job needs a building contract and progress payments. Lenders also set their own triggers: structural work such as changes to external walls or anything needing council approval, and at some lenders a dollar threshold, from about $50,000 at a couple of lenders to $250,000 at one major banking group when no LMI is needed. At least one major bank’s construction policy explicitly covers renovations to an established home that is also the security, not just new builds.

In short, the loan is approved against a fixed-price building contract. The lender pays the builder in stages as each part of the work is done, and you pay interest only on what has been drawn. The detail on stages, inspections and the final payment is in our construction loan guide.

The reason a construction loan is often the answer when you have no savings is the valuation. The valuer assesses what the home will be worth when the work is finished (an “as if complete” or “on completion” valuation), and the lender measures your LVR against the lower of that figure and today’s value plus the contract price. Most construction lenders on our panel go to 90% on that basis with LMI, a few to 95%, and a couple stop at 80%.

In the example below the valuer puts the finished home at $1,100,000, but today’s value plus the contract is $1,050,000, so the lender uses $1,050,000.

Same house, same builder. On today’s value the owners are $110,000 short and would need savings they do not have. On that basis the whole contract still fits under 80%.

That only works if the work adds real value. A valuer does not add up your receipts: they compare the finished home with recent sales nearby, so a $150,000 renovation rarely adds $150,000 of value. Our bank property valuation guide covers what to do after a low one.

Things to budget for:

• Any money you are contributing is usually spent before the lender’s first progress payment.
• Some lenders charge a fee on each draw. At least one major bank charges no progress-claim fees and allows offset during the build.
• The valuer reviews the contract’s payment schedule, and if it looks non-standard the lender can ask for the contract to be amended. Have it checked before you sign.

A knock-down rebuild follows the same pattern, valued as land today and house-and-land on completion. If you are weighing a big renovation against a rebuild, talk to us before the plans are final, because the finance can change the answer. Our construction home loans page has the service detail.

5. Add renovation costs to your purchase loan

If you are buying a home that needs work, the easiest time to borrow for the renovation is often at purchase. At purchase, lenders lend on the lower of price and valuation, so extra money for a cosmetic renovation has to fit under the LVR limit. For structural work, some lenders will set up a construction component from day one and lend against the finished value. So can you get a mortgage for more than the purchase price to cover renovations? For structural work, sometimes, with the right lender and a building contract ready at application.

First home buyers need extra care. If you bought under the Australian Government 5% Deposit Scheme, adding money later may not be a simple top-up. At one major bank, a client who had bought under the scheme (then called the First Home Guarantee) wanted about $25,000 on top of a loan of roughly $580,000. The bank had to refinance the whole loan internally to write the extra, and the entire balance was repriced higher, not just the $25,000. Ask how your lender handles it, and price any top-up against the cost of repricing the whole loan before you commit. Our 5% Deposit Scheme guide covers the scheme rules.

6. Personal loan: for small jobs or when there is no equity

A personal loan is a separate loan, usually unsecured, repaid over a set time, usually one to seven years. It makes sense when the job is small, when there is little or no equity, or when you do not want to touch a low-rate mortgage. Approval is fast and there is no valuation. The trade-off is a higher interest rate and a much smaller maximum than a home loan can raise. The repayment also eats into your borrowing capacity for any home loan you apply for while it is running.

Credit cards are for a can of paint, not a renovation.

We arrange personal loans for home improvements too.

Home loan top-up vs personal loan: which costs less over the term?

The answer is not the one most people expect. A home loan top-up almost always has the lower interest rate. But total interest is rate multiplied by time, and a top-up left inside a 30-year mortgage is paid off over 30 years.

On a mid-size renovation, a top-up left to run for 30 years can cost more in total interest than a seven-year personal loan at a much higher rate. Put the same top-up in its own split and repay it over the same seven years, and it is cheaper than both. Plug both options into our loan repayment calculator at today’s rates and look at total interest, not the monthly repayment. When you compare personal loans, compare the comparison rate, not the headline rate.

What lenders need before they release renovation funds

For a cosmetic renovation funded by a top-up or refinance:

1. Written quotes or a signed contract, unless the amount is under the lender’s statement-of-purpose threshold. Without LMI, lenders on our panel accept a statement of purpose for a cosmetic renovation up to anywhere from about $100,000 to $1 million, depending on the lender, with a few hundred thousand the common point; above their threshold they want quotes. One lender goes to $750,000. With LMI the thresholds drop sharply, several lenders want quotes at any amount, and a couple allow nothing above 80% at all.
2. Your usual income documents, current loan statements and a council rates notice.
3. A valuation, ordered by the lender.

For structural work on a construction loan, add:

1. A fixed-price building contract with a progress payment schedule.
2. Council plans and the approval that applies to your job. In NSW that is exempt development, a complying development certificate or a development application, depending on the work (see the NSW planning approval pathways).
3. A licensed builder. In NSW a contractor licence is required for residential building work valued at more than $5,000 in labour and materials, including GST. Check the builder’s licence with Service NSW before you sign anything.
4. Home building compensation cover where the contract is over $20,000. Under NSW rules a builder can ask for no more than 10% of the contract price as a deposit before work starts (Building Commission NSW).
5. If you are building yourself, an owner-builder permit for work over $10,000 (NSW owner-builder rules), and a lender that accepts owner builders. Not every lender does.

Why renovation loan applications get declined

In our experience the renovation itself is rarely the problem. Beyond the top-up traps in section 2, declines come from:

• Serviceability: the whole new loan is tested at the buffered rate, so a $100,000 top-up can fail even with plenty of equity.
• A valuation that comes in low and tips the LVR over 80% or over the lender’s cash-out limit.
• A trail of credit enquiries from shopping the loan around yourself. Several in a couple of months can read like repeated declines.
• Existing debts. A personal loan, car loan or even an unused credit card limit counts against your capacity. Our borrowing power guide shows how lenders count them.

Is there a government grant for home renovations in 2026?

Not for general renovations. As at 26 September 2026 there is no NSW or federal grant that pays for a general renovation of the home you already live in. The NSW household grants and rebates list covers energy upgrades and bill rebates, and the COVID-era HomeBuilder grant, which did cover substantial renovations, closed to applications in April 2021. The exceptions are targeted: older Australians approved for Support at Home can get funding for home modifications such as grab rails or a bathroom refit, and energy upgrades have their own programs.

For energy upgrades: NSW’s Home Energy Saver program offers a zero-interest loan of up to $15,000 (open now) or a discount of up to $4,000 (coming soon), and the federal Cheaper Home Batteries Program takes around 30% off an eligible home battery. The Household Energy Upgrades Fund is not a grant but funds lenders to offer discounted loans for solar, batteries, insulation and double glazing.

One grant does mention renovation: the NSW First Home Owner (New Homes) Grant of $10,000 can apply when a first home buyer buys a substantially renovated home (most of it removed or replaced, nobody living in it before, during or after the work, first sale since, price up to $600,000). It does not pay for renovating a home you already own.

Frequently asked questions

Can I borrow money to renovate my home?

Yes. With equity in your home you can borrow through a redraw, a top-up, a refinance with cash out, or a construction loan for structural work. Most lenders let you borrow up to 80% of the home’s value without LMI, less what you owe. With little or no equity, a personal loan is the usual fallback.

Can you refinance a home loan to pay for renovations?

Yes. You move to a new lender, borrow more than your payout figure and use the cash out for the renovation. Most lenders want quotes or a building contract as evidence, and the whole new loan is assessed on your income and expenses. It suits larger jobs, or a loan whose rate needs reviewing anyway.

Can I get a renovation loan with no equity?

Sometimes. For structural work, a construction loan can take the finished value into account, which can create the equity the job needs. About 20 lenders on our panel will release cash above 80% of the home’s value for a non-structural renovation, at a cost. Otherwise a personal loan is the realistic option for smaller jobs.

Can you include renovation costs in a mortgage in Australia?

Yes, with the right lender. When you are buying, some lenders will add a construction component for structural work, lending against the finished value; cosmetic costs have to fit under the normal LVR limit. If you already own the home, the renovation goes on as a top-up or a refinance. Have quotes ready at application.

Do I need a construction loan for a renovation?

Not always. If you have enough equity on today’s value, many lenders will fund even structural work as a lump sum. You need a construction loan when you want the lender to lend against the finished value, or when the job runs on a building contract with progress payments. Cosmetic work such as kitchens, bathrooms and flooring is usually funded as a lump-sum top-up or refinance.

Is a personal loan or a home loan top-up cheaper for a renovation?

A top-up has the lower rate, but left inside a 30-year mortgage it can cost more in total interest than a short personal loan. The lowest-cost approach is usually a top-up in its own loan split, repaid over five to seven years. Compare total interest over the term, not just the rate.

Is there a government grant for renovations in NSW?

Not for general renovations. As at September 2026, NSW and federal help for existing homes is targeted: energy upgrades such as the Cheaper Home Batteries Program, NSW energy incentives and discounted green loans through the Household Energy Upgrades Fund, and home-modification funding for eligible older Australians through Support at Home. The HomeBuilder renovation grant closed in April 2021.

Talk to us before you sign the building contract

The easiest time to fix a renovation finance problem is before the quote is accepted. We work out your usable equity, order valuations where they will help and match the job to a lender whose policy fits it. Talk to a Mortgage World Australia broker or call (02) 8004 7459.

Patrick O’Brien, Director and Home Loan Specialist since 2001, Mortgage World Australia

This article contains general information only and does not constitute financial advice. Your personal financial situation, objectives and needs have not been considered. Before acting on any information, you should consider its appropriateness to your circumstances. Speak to a qualified mortgage broker for advice tailored to your situation. Mortgage World Australia Pty Ltd ATF O’Brien Family Trust (ABN 65 653 284 433) is a credit representative (CR No. 396946) of Mortgage Specialists Pty Ltd (ACN 612 422 178, Australian Credit Licence No. 387025).

Patrick O'Brien

Patrick is a Director and a Home Loan Specialist. He has been helping Australians with home loans since 2001. Prior to working as a mortgage broker Patrick was employed by Macquarie Bank for 3 years and also worked as an accountant for a publicly listed company. Patrick’s qualifications include:

Bachelor of Business, UTS Sydney. Majored in accounting and sub-majored in Finance and Marketing.
Diploma of Finance and Mortgage Broking Management FNS50310
Certificate IV in Financial Services (Finance/Mortgage Broking) FNS40804