February 9, 2026

How to Finance Your Home Renovation: A Practical Guide for New Zealand Homeowners

Renovating your home improves your living and usually adds value to your property. If you are updating kitchens and bathrooms or planning a more extensive makeover, one of the first questions is the same for many homeowners: How can I fund this renovation?

At Capital Advice, we help clients explore the most suitable financing options for their renovation projects. This guide lays out the common ways people in New Zealand fund renovations, what you should consider with each, how to position yourself for success with lenders and why you should talk to mortgage brokers.

Renovation Finance

Before you start swinging hammers or signing contracts with builders, it pays to understand your financial position. Finance planning helps you:

Set a realistic budget
Avoid cash flow issues mid-project
Maximise equity without overextending
Know when to use savings or borrowing

Finance isn’t just about accessing cash, rather it is about structuring a solution that fits your lifestyle, future goals, and comfort with repayments.

Option 1: Increase Your Home Loan

One of the most common approaches is to increase your current mortgage balance or refinance for a larger amount that includes renovation costs.

How It Works

Lenders will assess your total borrowing needs, including the renovation component, and evaluate your repayment capacity. This often involves reviewing:

Your income and employment stability
Your current mortgage and liabilities
The value of your property before and after renovation

If your home has increased in value since you bought it, you may have built equity. Equity is the difference between your property’s market value and your outstanding mortgage balance. Many lenders allow you to borrow against this equity to fund improvements.

A mortgage review and refixing is a good first step if you think your current loan could be restructured to release funds for renovation. This may improve your loan structure while giving you the cash you need.

Things to Consider

Increasing your mortgage can be cost-effective, especially if you can secure a competitive interest rate. However, adding more to your loan means higher repayments over the life of the loan, so it needs to balance with your budget and goals.

Option 2: Construction or Renovation Loans

Some lenders offer specialised products designed for building or renovation finance. These products allow you to borrow specifically for the work and may have features tailored to staged drawdowns as the project progresses.

Features of Construction/Renovation Loans

Funds are released as work is completed
Interest may be charged only on the amount drawn down (not the total loan)
Often used for larger or staged projects

This type of lending can suit bigger projects where costs are incurred over time rather than upfront. Before choosing this path, it is important to have quotes from builders or tradies so that your loan amount aligns with actual costs.

If you are contemplating a build or significant extension alongside a renovation, discuss this with a lender early. We can help you compare offers and structure the loan.

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Option 3: Personal Loans or Lines of Credit

For smaller renovation projects, such as new flooring, painting, or minor updates, some homeowners choose a personal loan or unsecured line of credit.

When This Makes Sense

Costs are modest and can be repaid quickly
You prefer not to alter your mortgage
You have strong cash flow and a clear repayment plan

While unsecured loans can be faster to arrange, they usually carry higher interest rates compared with secured mortgage lending because the bank’s risk is greater. This increase in cost should be balanced against convenience and your capacity to repay.

Option 4: Savings and Offset Strategies

If you have savings, you might choose to fund part of your renovation without borrowing. One way to make your savings work harder is through offset accounts if available with your mortgage.

With an offset loan, balances in linked savings and transaction accounts reduce the interest charged on your home loan. This can effectively free up cash flow over time that you can redirect into renovation costs.

If you want to explore whether offsetting or other loan structures make sense, mortgage structuring can help you model different scenarios.

Preparing to Apply for Renovation Finance

Whichever option you lean towards, being well prepared improves your chances of approval and helps you get a competitive outcome.

1. Know Your Costs

Get detailed quotes from builders or tradespeople. Lenders want to see that your renovation budget is realistic and supported by evidence.

2. Assess Your Equity and Borrowing Capacity

Most landers will require a post-renovation valuation to understand the property’s future worth. If you are unsure how much you can borrow, a pre-approval can give you a clear indication.

3. Review Your Liabilities

Short term unsecured liabilities, high levels of personal debt, multiple credit cards, and buy now pay later models can reduce your borrowing capacity. Consolidating debt or improving your debt-to-income profile can help before applying.

4. Prepare Documentation

Standard documents include:

Proof of income
Bank statements
Quotes for renovation work
Details of current loans and liabilities

Being organised reduces processing time and strengthens your application.

Real Examples: Finance That Works

Consider two homeowners:

Homeowner A has $245,000 equity and wants to renovate a kitchen and bathroom. They refinance part of their loan, use that equity to fund the work, and keep repayments manageable.
Homeowner B wants to extend the living area. They take a construction loan with staged drawdowns aligned to the builder’s milestones to make sure they only pay interest on what is drawn.

Both routes are valid, and an adviser’s role is to help match the finance structure to the project and client situation.

When to Speak to an Adviser

If you are unsure where to begin, talking through your project with a mortgage adviser can provide clarity. We can help you:

Find best renovation finance options
Understand how your borrowing capacity might change
Prepare your documents and application
Navigate equity release and loan structuring

Start with a conversation about your goals

Talk To a Mortgage Advisor Today

Renovations can breathe new life into your home and add significant value, but they require careful financial planning. Whether you increase your mortgage, take a dedicated construction loan, or draw on savings, the key is to choose a path that matches your budget and future plans.

By understanding your options and preparing thoroughly, you can move into your renovation with confidence and control. If you want help mapping out a renovation finance solution that works for you, get in touch with Capital Advice for personalised advice and support.