Renovating an existing home is a common reason Australian homeowners review their loan. Rather than sell and move, many people look to release built-up equity for a new kitchen, an extension, or a larger renovation. Interest rates and serviceability rules affect how far that borrowing power stretches. In 2026, the cash rate sat at 4.35% after the Reserve Bank of Australia lifted it on May 5 and held it on June 16. Lenders also apply APRA’s minimum 3 percentage point serviceability buffer, which affects how much they assess you can repay.
This guide explains the main equity structures, how a mortgage broker helps you compare them, and the costs and timelines to plan for. It is general information only, not financial advice.
What refinancing for a renovation actually means
Refinancing for a renovation usually means changing your existing loan, or adding to it, so you can access cash for the work. A top-up or loan increase adds to your current loan with your current lender. A cash-out refinance moves your loan to a new lender and releases equity in the process. A supplementary split keeps your main loan and adds a separate loan for the renovation funds. A construction loan releases money in stages as the build progresses.
Most decisions hinge on usable equity. Banks commonly define this as 80% of your property’s value minus your current loan balance. Bank of Melbourne, for example, uses that 80% benchmark when assessing a limit increase. Borrowing above 80% of the property value may be possible, but it can trigger Lenders Mortgage Insurance, often called LMI. Any extra borrowing is still subject to a lender’s serviceability assessment.
Ways to fund a reno with home equity
The right structure depends on the size and type of your project. Westpac’s guidance suggests a loan increase can suit standard renovations under roughly $250,000, while larger projects often call for a construction loan with staged drawdowns. LMI may apply above 80% loan-to-value ratio.
- Cosmetic or mid-size work such as bathrooms, flooring, or cosmetic updates may suit a top-up or supplementary split.
- Structural or major work such as extensions, second storeys, or rebuilds usually needs a construction loan with progress payments.
- Older homeowners may have other options, including the Home Equity Access Scheme or reverse mortgages.
If you want a step-by-step workflow for tapping equity specifically for a renovation, Go Mortgage’s renovation refinance resource walks through usable equity, loan structures, and the paperwork lenders may request, including quotes, council approvals, and an estimated post-renovation value.
Why work with a mortgage broker, and how they are paid
A mortgage broker acts as an intermediary between you and lenders. In Australia, brokers must act in a borrower’s best interests when recommending a loan, according to ASIC’s Moneysmart.
A good broker should start with your goals, budget, and renovation plan rather than a single product.
Brokers are generally paid by lenders through upfront and ongoing commissions, and they must disclose those commissions. Some may also charge a direct fee. Moneysmart recommends asking how a broker is paid, which lenders they work with, and why a particular loan suits your circumstances.
A broker’s role in a renovation refinance usually covers understanding your needs, laying out the options, preparing the application, and coordinating settlement. They do not guarantee approval or savings. The lender’s assessment and the property valuation still decide the outcome.
Step by step: how a broker runs a renovation refinance
The process tends to follow a predictable sequence, which helps you plan around valuations, approvals, and builder timelines.
- Health check. The broker reviews your current loan, rate, repayment position, and renovation goal.
- Valuation. They order or coordinate a property valuation to estimate usable equity and your current loan-to-value ratio.
- Model the structures. They compare a top-up, cash-out refinance, and construction loan, including offset and redraw features.
- Prepare documents. They gather quotes or building contracts, council approvals, and income evidence.
- Lodge the application. The chosen lender receives the file.
- Assessment and conditional approval. The lender checks serviceability and the property valuation.
- Settlement. Funds become available, either as a lump sum or in construction stages.
When you switch lenders, refinancing typically takes about four to eight weeks. Staying with your current lender for a top-up can be quicker, though timing still depends on valuation and assessment.
Costs and traps to model before you switch
Releasing equity is not free, and the headline rate is only part of the picture. Before switching, budget for fees that can reduce any benefit.
- Discharge fees to close your existing loan.
- Fixed-rate break costs if you leave a fixed term early.
- Application and settlement fees on the new loan.
- LMI if your borrowing pushes the loan above 80% of the property value.
Moneysmart lists these fees among the key items to check when switching home loans, and its switching calculator can help you estimate a break-even point. Cashback offers can look appealing, but account for the full-term cost of the new loan.
If you use Go Mortgage or another broker, ask them to model the real switching cost rather than the advertised rate alone. If you are in South East Queensland, you can also find a refinance mortgage broker in Brisbane to compare lender options and model these costs against your renovation goals before you commit.
Rates, buffers, and borrowing power in 2026
The RBA meets eight times a year to set the cash rate, and those decisions can flow through to variable mortgage rates. After the increase to 4.35% on May 5, 2026, and the hold on June 16, 2026, borrowing conditions have been shaped by that higher setting.
APRA’s 3 percentage point serviceability buffer means lenders assess whether you could still repay if your rate rose by that margin. This can cap how much you can borrow. Refinancing activity has stayed strong. ABS-based figures reported by the Australian Banking Association show 640,137 mortgages were refinanced in 2025, up 20% year on year.
Paperwork for renovation lending
Renovation and construction lending asks for more detail than a simple refinance. Lenders usually want fixed-price quotes or a building contract, relevant council approvals, and an as-if-complete valuation that estimates the property’s value once the work is done.
For construction loans, funds are released in stages rather than upfront. CommBank’s construction-loan guidance states that construction must commence within 12 months of disclosure, that interest-only repayments apply while funds are being drawn, and that typical progress-payment proportions run at 15 to 20%, then 20%, 20%, 30%, and a final 10%. Expect to fund a deposit and provide evidence at each stage before the next payment is released.
Structuring tips and risk management
How you set up the loan affects flexibility later.
- Use a separate split for renovation funds so you can track that portion and pay it down faster.
- Keep the loan-to-value ratio at or below 80% where possible to avoid LMI.
- Consider an offset account for cash management, and check redraw rules because they differ across products.
On the risk side, avoid over-capitalising by spending more than your local market is likely to return in value. Make sure insurance covers the work, keep a contingency for cost overruns, and stress-test your budget against a higher rate.
A simple worked example
Suppose a home is valued at $900,000 with a loan balance of $500,000. Eighty percent of the value is $720,000. Subtract the $500,000 balance and the usable equity is about $220,000, before fees and serviceability are considered.
That figure is a starting point, not a promise. The lender still assesses whether you can service the larger loan under APRA’s buffer, and the valuation may differ from your estimate.
How to brief your broker and get local help
Meeting a broker 60 to 90 days before work begins gives you time to sort valuations, documents, and approvals. Prepare a one-page pack covering your goals, budget, renovation quotes, approvals, and recent income documents. Then ask how they are paid, which lenders are on their panel, and why the loan is in your best interests.
Remember that this article is general information and does not account for your personal situation. Before acting, seek advice from a licensed credit provider or broker who can assess your circumstances and confirm what you can actually borrow.
