Case study: releasing $140,000 in equity to fund a renovation

The situation

A family in Melbourne's east wanted a kitchen and bathroom renovation plus significant landscaping — quoted at roughly $135,000. Their first instinct was an unsecured renovation loan, which their bank had quoted at just over 12%.

Their home had been purchased six years earlier for $760,000 and had never been revalued on their loan file.

The challenge

• The renovation quote was slightly above what a fixed-price contract would cover
• They wanted funds staged, not one lump sum sitting in a savings account
• A construction loan with progress payments was overkill for cosmetic work
• Serviceability had to hold with the larger loan at the buffered assessment rate

What we did

An upfront valuation returned $1,050,000. At 80% LVR their usable equity was $161,000 — comfortably more than they needed.

Because the work was cosmetic rather than structural, we avoided a construction loan and instead set up a $140,000 equity release as a separate variable split with its own offset. The funds sat in the offset reducing interest until each invoice was paid, so they only effectively paid interest on money actually spent.

The outcome

• $140,000 released as a separate split at 6.14% variable
• Roughly 6% cheaper than the personal loan alternative
• Funds held in offset, so interest accrued only as money was drawn down
• No LMI — final position sat at 78% LVR
• Separate split keeps the renovation debt visible and easy to pay down first

Why the split structure matters

Merging the equity release into the main loan hides it. Keeping it separate means you can see the renovation debt, target extra repayments at it, and — if the purpose ever changes to something investment-related — the borrowing purpose is clean for your accountant.