How to refinance your mortgage for renovations

How to refinance your mortgage for renovations

Refinancing your mortgage to renovate is a popular reason for re-evaluating your mortgage options.   Often this can also be referred to as a loan 'top up' or even a 'restructure'.   This can free up some extra cash by utilising equity in your property, and renovations can be a great way to add further value to it.


Renovating is not cheap, and in many circumstances can end up costing more than you initially anticipated.   The amount you need for a renovation project, extension or home improvement may be slightly more than your savings allow.  Therefore you might need to 'refinance' your home to help fund these improvements.   The amount needed will vary and depend on the size and scope of your renovation project.  You could be looking at anything from a few thousand to hundreds of thousands of dollars !

Refinancing your home can be an attractive way of borrowing money as interest rates are often lower than other finance options.  In this article, we'll look at what refinancing entails and your options for achieving the best interest rate on your new finance.


Refinancing (or remortgaging) basically means increasing your mortgage by adding more to it.   You are effectively raising more finance against the mortgage security of your home. 

Your home loan is extended to fund a new expense.  This effectively means creating an increased  mortgage for the amount you currently have outstanding, plus the new amount you want to raise for your project.

Remortgaging, or refinancing, does not have to be daunting if you take the time to do the research, preferably before you start picking the tiles for your bathroom.  Deciding which wall will be pulled down to extend that walk-in-wardrobe you've always dreamed about is the hardest part, finding a new mortgage isn't !

The first factor that homeowners need to consider is whether they have enough financial stability to take on larger mortgage repayments and whether the renovations will actually pay off in the long run.   Be careful not to over-capitalise on your renovations - spending more than the value of improvements upon completion.   This could end up putting you into a more stressful situation - although most banks will be keen to see the value of your home increasing.

In most situations carefully considered home improvements will increase the value of the property, meaning your refinancing is actually an investment in the future value of your home.

A few tips to consider before you start your renovations:

  • Set a budget - many renovators try not to spend more than 10% of the property's value on improvements.
  • Research property values in the area - this will help you understand whether or not you may be over-capitalising your property.  Do you really want to own the best house in the worst street ?

With over-capitalisation, there may come a point where your renovation will not improve the value of a property.  Some houses, in some locations, may have a natural ceiling of value. This means that not even a gold plated bathtub will make some houses worth a million dollars.



Topping-up means that you borrow money in addition to the loan you used to purchase your home (using the equity you have in your home). The top-up can be a separate loan or added to your existing home loan.  Remortgaging typically means taking out a new loan for your home with the additional amount added.

Thinking about what kind of loan is going to suit you long term is a great place to start - are you looking to start a family in the near future that could impact your weekly income ?   Are you or your spouse intending to retire in the near future ?  Life can also throw unexpected situations at you so making sure you are prepared long term is always something that should be high on the list of things to consider. 




Our mortgage advisors are experienced in helping you seek new finance for your home.  No matter what your circumstances are, if you need to borrow more funds for a project and you own your own home with more than 20% equity in it, chances are we can help.

A mortgage broker is on your side and is an independent professional finance specialist to speak to about your individual options.  They can chat to you about what your property is currently worth; what type of project you are looking to undertake and the home loan options that may be suitable.

Also, our services are 100% FREE!  You can book a consultation with an advisor at anytime that suits you.  All you need to do is fill out the following easy form with some basic details and we'll be in touch with you promptly.


Depending on the value and nature of the renovations, you should notify your insurance company before you start knocking down walls.  Different insurance providers have different requirements so check your policy document.  Here at SMM we have an in-house insurance team that can help talk you through your best options.