If you’ve been thinking about a renovation or new build, you’ve probably noticed that the financial picture feels a little uncertain right now. You’re not alone. It’s one of the most common topics we’re hearing about from clients at the moment. Here’s an honest look at what’s driving costs, what it means for your project, the main ways to finance a renovation, and how to put yourself in the best position regardless.
Why Costs Are Climbing Again
After a period of relative calm through 2024 and into 2025, construction costs are on the move again. The main culprit is fuel. Rising fuel prices, driven in part by ongoing global tensions, are flowing through the entire construction supply chain. Virtually every stage of a build relies on fuel in some way, whether that’s manufacturing materials, transporting them to site, or running equipment during the build itself.
What this looks like in practice is higher freight and logistics costs, rising prices for core materials like steel, concrete and plastics, and fuel-related surcharges being added by suppliers that ultimately land on the client’s quote. These pressures are real and they’re happening now, not at some point down the track.
What This Means for Your Project
For anyone planning to build or renovate in 2026, there are a few things worth keeping in mind.
First, quotes may not stay valid as long as they used to. Builders are managing rapidly changing input costs and many are shortening the window during which a quote is locked in. If you receive a quote you’re happy with, don’t sit on it.
Second, your contingency budget probably needs to be larger than you’d normally allow for. The standard 10–15% buffer that builders recommend in stable conditions may not be enough if material costs keep shifting during your project. Having a bit more breathing room can save a lot of stress down the line.
Third, timelines could be affected. If supply chain disruptions continue, delays in materials can flow on to your overall schedule. It’s worth having that conversation with your builder upfront so you’re not caught off guard.
Ways to Finance a Renovation
How you pay for the work matters as much as the quote itself. The right option depends on the size of the job, how much equity you have and how quickly you need the money. Here is a quick comparison.
| Option | Often suits | Watch out for |
| Savings, redraw or offset | Smaller jobs, or owners well ahead on repayments | Running your cash buffer too low |
| Home loan top-up (equity) | Cosmetic or mid-size renovations | Spreading a short-term cost over a 30-year loan |
| Construction loan | Structural renovations, extensions and rebuilds | Paperwork: fixed-price contract, plans and approvals |
| Refinance | When your current lender won’t top up, or your rate is uncompetitive | Break costs if your loan is fixed |
| Personal loan | Smaller jobs needed quickly | Higher rates and shorter terms |
Savings, Redraw or Offset
Using money you already have costs no new interest and needs no application. However, check your lender’s redraw rules first, and keep enough aside for emergencies. With costs moving, the job is likely to run over at some point.
Home Loan Top-Up Using Your Equity
If your home has grown in value or your loan has come down, you may be able to borrow against that equity. Most lenders lend up to 80% of the property’s value without Lenders Mortgage Insurance, and some go higher with LMI. A top-up is usually the cheapest rate you can get. Even so, if you only make the minimum repayments, a $60,000 kitchen can end up costing you interest for decades, so plan to pay it down faster. Our guide to refinancing when your home has gone up in value explains how lenders work out usable equity.
Construction Loan for Major Renovations
For structural work, extensions or a second storey, a construction loan is often the better fit. The lender releases funds in stages as the builder completes each part of the job, and you usually pay interest only on the amount drawn so far. Many lenders also value the property “as if complete”, so the finished renovation can count towards your borrowing. If you are weighing up a bigger rebuild, see our guide to knockdown-rebuild and duplex finance.
Refinancing to Fund the Work
If your current lender won’t increase your loan, or your rate is no longer competitive, refinancing to a new lender can release equity and lower your rate at the same time. If part of your loan is fixed, check the break costs before you move.
Personal Loan for Smaller Jobs
For a bathroom refresh or new decking, a personal loan can be quicker because it needs no property valuation. The trade-off is a higher interest rate and a shorter term, which means higher repayments. Avoid putting large jobs on credit cards or buy now, pay later accounts, because their rates are higher again.
What Lenders Need to See
Lenders want confidence that the money will turn into finished work. Depending on the size of the job and the loan type, expect to provide:
- A fixed-price building contract with a licensed builder, or written quotes for smaller jobs
- Plans, specifications and any council or private certifier approvals the work needs
- Proof of the builder’s home building insurance where it is required. In NSW, this is generally residential work over $20,000.
- Your usual income documents, because the lender will reassess whether you can afford the larger loan
Owner-builder projects are harder to finance, and fewer lenders accept them. If you plan to manage the build yourself, talk to us before you start, so we can find a lender whose policy fits.
How to Protect Yourself Financially
While you can’t control what’s happening in global markets, you can control how well-prepared you are on the finance side. A few things to think about:
Sort your finance early. It’s one of the best things you can do. Knowing your borrowing capacity before you commit to a project means you can make decisions with confidence, not guesswork. It also puts you in a stronger position when negotiating with builders.
Match the loan to the project. If you’re using a construction loan, structure it around your builder’s payment stages from the start, and you’ll avoid headaches down the track.
It’s also worth thinking about whether staging your renovation makes sense. Breaking a larger project into phases can help spread costs over time and give you more flexibility if the market shifts during the process.
Renovation Finance FAQs
For most homeowners with equity, a home loan top-up or construction loan has the lowest interest rate, because the loan is secured against your home. Savings or an offset balance cost no new interest at all. The cheapest option overall also depends on how quickly you pay the money back.
Often, yes. If you have usable equity, many lenders will increase your loan to fund renovations. Most lend up to 80% of the property’s value without LMI, and some lend more with LMI. The lender will reassess your income and expenses for the larger loan.
Usually only for structural work, such as extensions, second storeys or major rebuilds. These are paid out in stages to the builder. Cosmetic renovations are generally funded with a simple loan top-up, savings or a personal loan.
Builders often recommend 10–15% of the project cost, but with material and fuel costs moving, a larger buffer is sensible. Make sure your finance covers the contingency too, so an overrun doesn’t stall the job.
The Bottom Line
Uncertainty in the market doesn’t mean you should put your plans on hold indefinitely; it means planning matters more than ever. Having a clear picture of your budget, your borrowing capacity and your contingencies gives you a much stronger foundation to move forward from.
If you’re thinking about a renovation or build and want to work through the numbers, feel free to get in touch. It’s a free conversation that could save you a lot of uncertainty later.
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. Lending criteria, fees and charges apply. Consider whether it is appropriate for you and speak to us for advice specific to your situation.
Need Some Help?
Not sure where to start? That’s exactly what we’re here for. Drop us a message and we will get back to you within one business day with clear, honest advice tailored to your situation.
