Top tips to use home equity for renovations

Equity in your property represents capital you can deploy without selling the asset that's generating it.

For Gold Coast homeowners sitting on substantial equity after years of price growth, refinancing to fund renovations offers a pathway to improve lifestyle, increase property value, and potentially reduce taxable income if the property generates rental income. The decision to access equity isn't just about funding a kitchen or adding a deck. It's about understanding how much you can borrow, what the additional servicing costs look like, and whether the renovation adds more value than it costs to finance.

How much equity can you actually access?

Most lenders will allow you to borrow up to 80% of your property's current value without requiring lender's mortgage insurance. If your home is worth $850,000 and you owe $400,000, your available equity sits at roughly $280,000 before hitting that 80% loan to value threshold. Borrowing beyond 80% is possible but attracts LMI, which can add thousands to your costs and rarely makes sense for discretionary spending like renovations.

Consider a scenario where a couple in Burleigh Waters owns a property now valued at $1,100,000 with $500,000 remaining on the mortgage. They want to access $150,000 to add a second storey and capture ocean views. At 80% LVR, they can borrow up to $880,000, giving them $380,000 in accessible equity. After accounting for refinance costs and a buffer, they comfortably access the $150,000 without crossing into LMI territory. The additional repayments on $150,000 at current variable rates add roughly $900 to $1,000 per month to their loan servicing, which they've confirmed fits within their cash flow after accounting for income growth since the original loan.

What renovation costs can you capitalise into the loan?

You can refinance to cover the full scope of renovation costs, including builder fees, council approvals, design work, and even temporary accommodation if you need to move out during construction. Lenders release funds progressively as the build reaches certain milestones, not as a lump sum upfront. You'll need a detailed quote or contract from your builder, and the lender will typically require a valuer to confirm the post-renovation value supports the increased loan amount.

If the property is an investment, the interest on the portion of the loan used for renovations becomes tax-deductible, provided the work maintains or improves the income-producing capacity of the asset. Adding a second bathroom to increase rental appeal qualifies. Installing a pool for personal enjoyment in your own home does not. The distinction matters because it changes the effective cost of borrowing and influences whether the renovation makes financial sense relative to other uses of that equity.

Does the renovation add more value than it costs?

Not all renovations return dollar-for-dollar increases in property value. Kitchens and bathrooms in established Gold Coast suburbs like Mermaid Waters or Broadbeach Waters typically return 70% to 90% of costs in added value, while pools and high-end finishes often return less. If you're borrowing $120,000 to renovate and the work adds $100,000 to the property's value, you've increased your debt by more than you've increased your equity. That might still make sense if the renovation improves livability or rental income, but it's not a wealth-building move on its own.

In our experience, clients who treat renovation equity access as a capital allocation decision rather than a lifestyle shortcut tend to make better choices about scope and timing. The question isn't just whether you can afford the repayments. It's whether the capital deployed into the renovation generates a return that justifies the opportunity cost of not using that equity elsewhere, whether that's further property acquisition, debt reduction, or other investments.

How does refinancing to release equity differ from a standard refinance?

A standard refinance focuses on switching lenders or loan products to reduce your interest rate or access different features. Refinancing to release equity increases your loan balance, which changes your risk profile in the lender's eyes and requires a full assessment of your current borrowing capacity. You'll go through income verification, expense assessment, and a new property valuation. If your income hasn't kept pace with serviceability requirements or your expenses have increased significantly, you may not be able to access the full amount of equity you're targeting.

Lenders calculate borrowing capacity using your net income after tax, existing debts, living expenses, and a buffer above current interest rates to stress-test your ability to service the loan if rates rise. If you've taken on new credit commitments since your original loan, such as car finance or personal loans, those reduce your available capacity and may limit how much equity you can extract even if the LVR calculation suggests more is available.

Should you fix or keep the additional borrowing variable?

The portion of the loan tied to your renovation doesn't have to sit on the same rate type as your existing home loan. You can split the additional borrowing onto a separate variable or fixed rate, depending on your view of rate movements and your tolerance for repayment certainty. Fixed rates lock in your repayments but remove flexibility for additional repayments or further drawdowns. Variable rates allow offset accounts and redraw facilities, which can be useful if you're drawing down renovation funds progressively or want to park savings against the loan to reduce interest.

If your fixed rate is expiring around the time you're considering the renovation, refinancing the entire loan and accessing equity in one transaction often makes more sense than waiting. You consolidate the process, avoid multiple valuation fees, and reset your loan structure at a point where you're already reassessing your borrowing position.

What happens if your borrowing capacity falls short?

If your income and expenses don't support the additional borrowing you're targeting, you have three options. Reduce the scope of the renovation, increase your income in a way the lender will recognise, or bring in a co-borrower with additional servicing capacity. Some clients choose to stage renovations across two financial years, accessing a smaller amount of equity initially and returning for a top-up once their income has increased or existing debts have been reduced.

Another option is to assess whether you're with the right lender for your current financial position. Serviceability policies vary significantly between lenders, and some assess rental income, overtime, or commission income more favourably than others. A loan health check often reveals that switching lenders as part of the refinance process unlocks capacity that wasn't available with your current lender, even though your financial position hasn't changed.

Can you use equity from an investment property to renovate your home?

You can access equity from an investment property to fund renovations on your owner-occupied home, but the interest on that borrowing is not tax-deductible because the funds aren't being used to generate assessable income. The inverse is also true: if you access equity from your home to renovate an investment property, the interest on that portion of the loan becomes deductible because the funds are being used to improve an income-producing asset.

Keeping the debt tied to the correct property from a tax perspective requires careful loan structuring. If you're accessing equity across multiple properties, splitting loans and maintaining clear separation between deductible and non-deductible debt is essential. A mortgage broker experienced in investment lending can structure the refinance so that the debt is allocated correctly and you're not creating future issues with the ATO.

When does it make sense to wait rather than refinance now?

If property values in your area are rising quickly, waiting six to twelve months might increase your equity position enough to access the funds you need without stretching your LVR or serviceability. If you're expecting a pay rise, bonus, or the end of a fixed-term expense like childcare, your borrowing capacity may improve materially in the near term, allowing you to access more equity or secure a lower rate.

Conversely, if construction costs are rising or tradie availability is tightening, delaying the renovation might mean the same scope of work costs significantly more by the time you're ready to proceed. Gold Coast construction activity remains elevated, particularly in coastal suburbs where land supply is constrained and renovation is often more viable than buying a newer property at a premium.

Call one of our team or book an appointment at a time that works for you to discuss how refinancing to access equity fits within your broader wealth strategy and whether the timing aligns with your financial position and property goals.

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