Renovation loans

It is finance for improving a property you already own. Smaller cosmetic work is usually funded by increasing your existing home loan against your equity. Structural work is usually funded as a construction facility with a builder's contract, where the money is released in stages as the job progresses.

For a cosmetic update, generally not: a loan increase against equity is assessed on your income and the value of the house. For structural work, most lenders want a fixed price contract, plans, the relevant permit and a progress payment schedule before they will lend.

Broadly, cosmetic work replaces what is already there and structural work changes the building. New kitchens, bathrooms, flooring and paint usually sit on the cosmetic side. Removing walls, adding a storey or extending the footprint puts the job into construction territory, and lenders draw that line slightly differently.

On a construction facility, yes: the valuation is done as if the work is complete, from the plans and the fixed price contract. On a straight loan increase the lender values the house as it stands today. Which structure you use therefore changes the valuation you get.

Your options narrow considerably, because most renovation lending is secured against equity in the property. It is not automatically no. We will look at your position honestly and tell you whether it works now or whether it is worth waiting, subject to lender approval.

On a loan increase the funds come to you and you pay the trades as the work is done. On a construction facility the builder issues a progress claim, the lender usually inspects, you sign an authority, and the lender pays the builder directly at each stage.

Doing the work yourself moves you towards owner-builder territory, which fewer lenders will fund and which carries its own approval requirements. A smaller cosmetic job funded as a loan increase is different, because the lender is not funding a building contract at all. We will tell you which side yours falls on.

Get both costed by a builder before deciding, because the answer changes with the condition of the house and the scope of the work. Once you have the two numbers we will tell you how each one funds and what each one costs to hold while the work is underway.