Usable equity
Current value less existing secured debt is only the starting point. The lender applies its acceptable LVR and tests the higher total debt.
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Renovation construction loans · Victoria
Fund a major renovation without losing sight of the full cost
Large structural renovations and extensions may need construction-style finance rather than a simple top-up. Chris Berry helps compare the available equity, completed value, contract and lender process.
Major renovation finance compared clearly
The short answer
When does a renovation need a construction loan?
A lender may use a construction facility when works are structural, high-value, staged or materially change the property. Smaller non-structural projects may suit cash, redraw, a loan increase or another product, subject to approval and the risks of each option.
Plan before works begin
Choose finance that matches the scale and control of the project
The cheapest-looking source of funds is not always the most suitable. Compare rate, fees, repayment impact, valuation risk, access to funds and the temptation to mix project spending with other purposes.
- Separate cosmetic improvements from structural work requiring permits and staged funding
- Use detailed plans, specifications and costings rather than a broad estimate
- Allow for rent or reduced use of the home while work is underway
- Keep a contingency for variations, latent conditions and excluded items
Current and completed value
Major works may be assessed against both the existing property and the proposed home after renovation.
Contract and permits
Structural projects commonly require plans, a suitable building contract, permits, builder details and insurance evidence.
Living through the works
Temporary rent, storage, delays and overlapping household costs should be modelled alongside interest and regular commitments.
Compare the pathway
Loan increase or construction facility?
Project scale, equity and lender risk determine how funds may be provided. Each pathway has different access and documentation requirements.
Decision point
Top-up or equity release
Construction-style loan
Funds
May be advanced in one amount or accessible facility.
Usually released against completed stages.
Best fit
May suit smaller, simpler works with sufficient equity.
Often used for major structural or staged projects.
Evidence
Quotes and purpose evidence may be required.
Plans, contract, permits and inspections are commonly required.
Control
More flexible access can require stronger budgeting discipline.
Staged releases align funding with verified progress.
How it works
From costed plans to the final drawdown.
- 01
Define the scope, obtain detailed quotes or a building contract and calculate contingency and living costs.
- 02
Compare the current value, completed value, equity, repayments and suitable funding methods.
- 03
Obtain approval before works begin and follow the lender’s evidence or drawdown process.
Common questions
Clear construction-loan answers for Victorians
Can I borrow against equity for renovations?
Potentially, subject to valuation, acceptable LVR, borrowing capacity and the type of work. The lender may use a top-up or construction process depending on risk and scale.
Will a lender use the expected value after renovation?
For major works, a lender may obtain an as-if-complete valuation using plans and specifications. The result may be lower than the total current value plus project spending.
Can DIY work be included?
Lenders can restrict owner-managed or DIY construction and may exclude sweat equity. Confirm policy before relying on that contribution.
What if the renovation goes over budget?
The borrower is commonly responsible for shortfalls and variations unless the lender separately approves more credit. A realistic contingency and documented changes are important.
Can I refinance and renovate at the same time?
Potentially. The lender will assess the refinance, proposed works, value, total loan and exit from construction together.
Reviewed 14 September 2026 by Chris Berry. General information only and not financial, legal, building, engineering or tax advice. Lending criteria, valuations, interest treatment, contracts, progress payments and acceptable builders vary. Approval, cost and completion dates are not guaranteed.
Official information: Consumer Affairs Victoria building contracts · Consumer Affairs Victoria progress payments · Consumer Affairs Victoria plans and permits
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