So you’ve decided to renovate. Do your plans include a new kitchen, bathroom, extension or a bit of DIY? No matter how big or small your project, you may need to borrow money. Here are a few options to consider.

Give me the main points

  • Use the equity in your home.
  • Redraw from your current loan.
  • Use a line of credit.
  • Refinance your existing loan.
  • Apply for a personal loan.
  • Consider a building and construction loan

Use your home’s equity

Equity is the difference between the bank’s valuation of your house and the amount you owe on the loan. Equity can build up over time either because your home value has risen or you’ve reduced your loan balance.

To get an idea of how much equity you have, use a home equity calculator. Then, talk to your local NAB banker about how much you could access for your renovation project.

Handy tip

The equity to pay for your renovation depends on how much you can borrow. You need to be able to pay any increase in debt, so just because you have $100,000 equity doesn’t mean you can borrow this amount.

Use redraw — if available

Redrawing from your home loan for renovations may be another option, but it depends on how much you have available to redraw. Not all loans have a redraw option; they’re available only on our variable rate home loans but not our fixed rate loans. See how much you can redraw in your internet banking.

Handy tip

If you choose this option the balance on your loan will increase and that means you pay more interest and your repayments are likely to increase.

Use a line of credit

A simple way to access funds is by using a line of credit like our NAB Flexiplus Mortgage Facility. This type of finance lets you access funds as you need it, so you can pay for tradies or materials.

Interest is charged on the balance owed rather than the total loan amount. There are no regular loan repayments. This means you’re responsible for keeping the account in order so your balance doesn’t exceed its limit.

Handy tip

This is an at call facility, which means we could cancel the limit at any time and ask you to repay the full amount owing. Be aware that this type of lending is complex. We recommend you speak to a home loan specialist and your financial planner/accountant to see if it suits your plans.

Refinance your existing home loan

You might consider refinancing your existing home loan to get extra funds for your renovations. A refinance might involve moving your home loan from another lender to us. Alternatively, you may already have a NAB home loan but you need to change it, say from fixed to variable rate.

Handy tip

Refinancing your home loan, could also include debt consolidation. You could reduce your costs by putting all your debts, including credit cards and personal loans, into one repayment.

Apply for a personal loan

If you don’t have enough equity in your home, or you don’t have a redraw facility, then perhaps you could consider a NAB Personal Loan. They’re great to get smaller renovations underway, and you can apply for the loan once you have an estimated project cost. We offer personal loans from $5000, and the funds are deposited as a lump sum directly into your account.

Handy tip

Interest rates on personal loans are higher than home loans because they’re unsecured credit. The maximum loan term is 7 years, so even though the interest rate is higher, the interest charged over the life of the loan will be lower. Also, be aware that your loan repayments are higher because the loan term is shorter.

Consider a building and construction loan

If you've decided to renovate your home, then a building and construction loan (BICOE) could be the way to go. How do construction loans work? You receive your loan in increments, letting you pay invoices for the renovations as they come in.

Paying each bill as it comes in means you don't pay interest on your building costs until work's actually been done. This give you better cash flow.

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Handy tip

Just keep in mind that as you draw down more of your loan, the amount of interest you pay will start increasing. You'll need to budget for that.

Speak to the home loan specialists

Just as you get professional advice about your renovation project, ensure you do the same with your finances. If you’re unsure what type of loan will suit your renovation project, then visit a branch or call us on 13 40 83.

NAB home renovation finance tips

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