COMMON RENOVATION LOAN QUESTIONS
Here to answer all of your questions
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What is a renovation loan and how does it work?
A renovation loan is finance that allows you to fund improvements to your property, such as updating a kitchen, adding a new bathroom or extending your living space. You can use equity in your home, a personal loan or a loan specifically designed for renovations. The lender will assess your current loan, property value and renovation plans before approving the funds.
Can I use my existing home loan to fund renovations, or do I need a separate loan?
In many cases, you can top up your existing home loan rather than taking out a separate loan. This is usually done by increasing your current mortgage limit and using the extra funds for renovations. We can help you compare whether topping up your mortgage, refinancing, or taking out a dedicated renovation loan is the most cost‑effective option.
Do I need equity in my home to qualify for a renovation loan?
Yes, if you are using your home loan to fund renovations, you generally need equity — the difference between your home’s value and what you owe on it. Lenders typically require you to keep your loan within certain Loan to Value Ratio (LVR) limits, often 80% without Lenders Mortgage Insurance.
What types of renovations can a renovation loan cover?
Renovation loans can cover a wide range of improvements, from cosmetic updates like painting and flooring to major structural changes like extensions or second‑storey additions. You can also use them for landscaping, pool installation or adding energy‑efficient upgrades such as solar panels.
Can I use a renovation loan for DIY projects, or do I need licensed builders?
It depends on the lender and the scale of the work. Smaller cosmetic upgrades can sometimes be done as DIY, but for major renovations, lenders usually require quotes and invoices from licensed builders or tradespeople to ensure the funds are used appropriately.
How much can I borrow for renovations?
This depends on your income, expenses, existing loan balance and the equity in your home. Some lenders also take into account the expected value of your property after the renovations are completed, which may increase your borrowing capacity.
Do I need council approval or permits before applying for a renovation loan?
For most structural renovations or extensions, yes. Council approvals or building permits are often required, and lenders may ask to see these before releasing funds. For smaller, non‑structural updates, approvals are generally not needed.
What is the difference between a renovation loan and a construction loan?
Renovation loans are typically for improving or upgrading an existing property, while construction loans are for building a brand‑new home or completing major structural work from the ground up. Construction loans often release funds in stages, while renovation loans may provide a lump sum or staged payments depending on the lender.
How will the lender release the renovation loan funds?
Some lenders provide the renovation funds as a lump sum when your loan settles, while others release the money in stages as the work progresses. The method can depend on the size of the project, the lender’s policies and whether you are using licensed builders.
Will a renovation loan increase the value of my home?
Well‑planned renovations can increase your property’s market value, especially if they improve functionality, modernise the home or add extra living space. However, the return on investment depends on the type and quality of the renovations, local market conditions and buyer demand in your area.
OUR PROCESS
A to Z plus a little more
At Loan Theory, we believe knowledge is power — and we hope our educational guides, seminars, and social media content have already given you a bit of inside knowledge about how lenders work and what the loan process really looks like.
When you choose to work with us, you can expect clear, consistent communication in a way that suits you. We set expectations upfront — what we’ll need from you, what you can expect from us, and what’s coming next — so you’re never left wondering where things are at.
But our relationship doesn’t end when your loan settles. We’re here for the long run. As your needs change, we check in and review your loan regularly to make sure it still suits your goals. Our aim is simple: to be your trusted broker for life.
BEFORE WE EVEN MEET
We have dozens of free guides and educational video content available across our platforms. We hope these help guide you through your loan process
INITIAL CONSULT
When you are ready, book in a consult to run through your unique lending scenario. We answer any and all of your questions, discover what your lending goals are and build an application ready to submit to a lender.
LENDER COMPARISON
We take your scenario and run that against our panel of lenders to find the most suitable loan for you. We present you the the others to you before submission.
LENDER SUBMISSION
We submit your application to the chosen lender for approval.
APPROVAL AND SETTLEMENT
Once the loan is approved the lender will prepare the loan contracts and we run you through the signing. Once signed and returned to the lender settlement is booked. Settlement occurs.
POST SETTLEMENT
Once your loan is settlement we don't stop there. We keep an eye on your loan and the interest rate market to ensure your loan rate and the loan structure meet your purpose. If interest rates change we make sure the rate change is automatically passed on to you.