Renovation loans in Sydney's Eastern Suburbs. A new kitchen and a second storey are funded in different ways. Shane works out what your equity and income allow, then sets up the loan to suit the work, comparing 30+ lenders with a $0 brokerage fee.
Renovate or move?
If you like where you live but the house no longer works for you, it usually comes down to renovating, or selling and buying something that does. Here's how the costs compare in the Eastern Suburbs.
What moving costs
Buying a $3.2 million home comes with about $160,650 in stamp duty, registration and conveyancing, all payable at settlement. The agent's commission and marketing on the home you sell are on top of that.
Using the equity you have
If you've owned in Clovelly, Maroubra or Randwick for some years, your home may now be worth well over what you owe on it. That difference is equity you can borrow against, and it may cover the renovation without selling. Shane checks the figure with a valuation before you commit to anything.
If moving suits you better
Sometimes the house can't be made to work, or the renovation would cost close to what you'd spend moving. In that case Shane can work out what you could buy for instead. The page on upgrading to your next home explains how that finance works.
Is your renovation cosmetic or structural?
Lenders split renovations into two types, and the type decides how the money is released. It's the first thing Shane will ask about, ahead of how much you want to spend.
Cosmetic
- Kitchens, bathrooms, floors, paint, decks and landscaping
- Funded as an increase to your home loan
- Released in full at settlement
- Quotes usually needed only above the lender's cash out limit
Structural
- Removing walls, extensions, second storeys and a larger footprint
- Funded through a construction facility
- Released through progress payments as each stage is completed and inspected
- Council approval and a fixed price building contract required
A $250,000 kitchen and bathroom renovation is usually still cosmetic. Removing a load-bearing wall is structural, even when it costs a fraction of that.
Three ways to fund a renovation
Which one suits you depends mostly on whether the work is cosmetic or structural, and on how much you've already paid into the loan. Shane arranges all three across the Sydney Eastern Suburbs and will tell you which fits before you apply.
Increase your home loan
This is the usual way to fund cosmetic work. If your home is worth more than when you bought it, you can borrow against that equity. Either your current lender increases the loan, or you refinance and release the equity in the same application. Refinancing makes sense if your rate is no longer competitive, because the extra borrowing then goes onto the new rate too. Either way, the funds are released in full at settlement, before the work starts.
A construction facility for structural work
Removing walls, adding a storey or extending the footprint usually needs a construction facility. The lender approves the full amount but releases it through progress payments, once each stage of the work is completed and inspected. You only pay interest on what's been released, and most lenders let you pay interest only until the work is finished. The build period for a renovation is usually around 12 months, against 18 to 24 for a new build.
Redraw or offset you already have
If you've been paying extra into the loan, or you have savings in an offset account, part of the budget may already be available to you. There's no application and no valuation. Money in an offset account is yours to spend. Redraw works differently, because it's the lender's arrangement to lend your extra repayments back to you, and that access can be limited. Confirm what's available before you book tradies. The redraw guide explains when access can change.
Shane also arranges home loans, first home buyer loans, refinancing, investment loans, pre-approval, bridging loans, construction loans, self-employed home loans, debt consolidation and specialist lending.
Renovating across the Eastern Suburbs
The housing stock changes from suburb to suburb, and so does what the lender will ask for.
Semis and bungalows in Coogee, Clovelly and Randwick
Interwar semis and California bungalows often need a new kitchen and bathroom, and the back of the house opened up to the garden. The kitchen and bathroom are cosmetic and can be funded with a loan increase. Opening up the rear is structural and needs a construction facility.
Terraces in Woollahra, Paddington and Waverley
Many terraces here sit in heritage conservation areas, where council looks closely at any change to the facade. That affects how long approval takes, not whether the finance is available. Shane times the application so the loan approval is still current when council signs off the plans.
Art deco and walk-up units near the beaches
In the older blocks around Coogee and Bondi, renovating a unit usually needs the owners corporation to approve the work. The lender will want to see that approval before releasing money for anything structural, so get it before you apply.
Larger blocks in Maroubra and Kingsford
Post-war brick homes on deeper blocks often have room for a rear extension or a secondary dwelling, and both are structural. If you plan to rent out a granny flat, tell Shane at the start. Some lenders will count the expected rent towards your borrowing capacity. The borrowing that funds it is also best kept in its own split, because the interest on it may be deductible.
Shane is based in Coogee and works across the whole of the Eastern Suburbs, with local pages for Coogee, Randwick, Clovelly, Waverley, Maroubra and Woollahra.
What changes the cost of a renovation loan
A shorter term for the renovation money
Money added to a home loan is usually set up over 30 years unless you ask for something shorter. At 6.25%, $150,000 over 30 years is about $924 a month and just over $182,000 in interest. Over 15 years it's about $1,286 a month and around $81,500 in interest. The shorter term costs $362 a month more and saves roughly $101,000 over the life of the loan.
A separate split for the new money
Shane sets the renovation money up as its own split, with the same lender at the same rate. Your existing loan stays on its current term and the new money runs over a shorter one. If the higher repayment is more than you want to commit to, keep the split on 30 years and make extra repayments when it suits you.
Paying interest only on what's been spent
On a construction facility you only pay interest on what's been released. With $150,000 released in four equal progress payments, one every three months through the first year, the interest for that year at 6.25% is about $3,500. Released as a lump sum at the start, the same $150,000 would cost about $9,375. A loan increase for cosmetic work is released as a lump sum. If it goes into an offset account linked to the loan, it reduces your interest until each invoice is paid.
Keeping investment borrowing separate
What you spend borrowed money on decides whether the interest is deductible. Borrowing to renovate an investment property is fine. If some of it goes on your own home instead, you're left with a mixed purpose loan, which has to be apportioned for as long as it runs. A separate split for each purpose keeps the deductible borrowing clean.
Shane is absolutely amazing. He makes the whole process so seamless and supports you every step of the way. He is honest and very approachable. Would definitely recommend.
You won't find a better Broker in Sydney!! Shane got us the best deal and went well beyond the call of duty to ensure our deal went through without a hitch. Thank you for all your help Shane, we couldn't have done this without you!
Shane has been absolutely amazing. His professionalism and availability at every step made this whole process so much easier. He answered all our 1,000 questions with such patience and expertise, which gave us the confidence to take this big step. We truly recommend him.
Shane's knowledge, expertise, efficiency, communication & customer service is top tier. He was super helpful in explaining things I didn't understand & in a timely manner. Kept us informed at all times as to where our application was at etc. Would definitely recommend. 10/10. Thanks Shane!
I had a great experience working with Shane. He was professional, knowledgeable, and always quick to respond to any questions or concerns I had throughout the process. His communication was excellent, and he made everything straightforward and stress-free. I really appreciated his reliability and dedication, and I wouldn't hesitate to recommend him to anyone looking for a trustworthy broker.
Finding the right mortgage broker can be daunting, but save yourself the time and go to Shane from Finance Craft. He is experienced, responsive, and patient with all questions. Shane acted promptly to remove any blockers and challenges, ensuring a smooth and stress-free process. He was always available for questions and calls, demonstrating his commitment and dedication, guiding us every step of the way and making the entire experience seamless. We will use his services for future property finance matters. Highly recommended, thanks Shane!
Working with Shane
Work out your budget
Shane looks at your current loan, what the home is worth and what your income supports, so you know what you can spend before an architect draws anything.
Choose the structure
He works out whether you need a loan increase or a construction facility, and whether the renovation money should have its own split. Then he compares 30+ lenders on rate and on cash out policy, which varies widely between them.
Through to the final payment
Shane handles the application and the valuation. On a construction facility he also handles each progress payment request through to completion, while you deal with the builder.
Renovation loan FAQs
How do I finance a renovation?
You'll use one of three. The most common is an increase to your home loan, either with your current lender or through a refinance. Structural work usually needs a construction facility instead, which releases the money through progress payments as the work is done. If you've already paid extra into the loan, you may be able to use redraw or an offset account. I'll tell you which fits before you apply.
How much equity can I release to renovate?
Most lenders will lend up to 80% of what your home is worth before lenders mortgage insurance is payable. On a $2 million home with $900,000 owing, 80% is $1.6 million, which leaves $700,000 of available equity. How much you can actually borrow also depends on your income, and for most people that's the lower of the two limits. I'll confirm both before you settle on a budget.
Do I need quotes or council approval?
Not always. Most lenders will release cash out up to a set limit with just a declaration of what it's for, commonly $50,000 to $100,000 depending on the lender. Above that limit they'll want quotes or a scope of works. Structural work needs council approval or a complying development certificate, a fixed price contract with a licensed builder, and the builder's insurances.
Is a renovation loan different from a construction loan?
It depends on the work. For cosmetic work, the renovation is funded as an increase to your home loan, which works like any other mortgage. For structural work, it's a construction loan, the same product used for new builds. The build period is usually shorter, because renovations finish sooner than new builds.
Will the valuer count the renovation I'm planning?
No. The valuation is based on the property as it stands today. The equity you can borrow against is the equity you have now, not what the finished work will add. The exception is a construction facility, where the lender usually orders an as-if-complete valuation alongside the current one.
Can I renovate an investment property the same way?
Yes, and how the loan is set up matters more. What you spend the money on decides whether the interest is deductible. Renovating the investment property itself is fine. If some of the money goes elsewhere, you're left with a mixed purpose loan, which has to be apportioned for as long as it runs. I'll set the renovation money up as its own split so the position stays clear for your accountant.
Do you arrange renovation loans across the Sydney Eastern Suburbs?
Yes. I'm based in Coogee and work with clients across Randwick, Clovelly, Bronte, Bondi, Waverley, Maroubra, Paddington, Woollahra and the surrounding suburbs. Knowing the area helps more with renovations than with most lending, because heritage conservation areas, strata approvals and block sizes all affect what the lender will ask for.
Thinking about renovating?
Send Shane your loan balance, a rough idea of what the home is worth and what you're planning to spend. He'll tell you how much is available and how the loan should be set up. Based in Coogee and working across the Eastern Suburbs, with a $0 brokerage fee.
Your local Sydney Eastern Suburbs broker
Shane specialises in helping clients across Coogee, Clovelly, Bronte, Bondi, and all surrounding Eastern Suburbs.