Five Ways Sellers Can Fund a Pre-sale Renovation

Five Ways Sellers Can Fund a Pre-sale Renovation

Renovating a home before putting it on the market can serve home sellers very well, provided that they choose the right parts of the property. Spending money on renovations that are likely to return a good return on investment is certainly worth it, though.

When asking your real estate agent to recommend a selling price for the property, they will probably conduct a comparative market analysis on the home. This will entail taking stock of all the features and amenities of the property and assessing their overall state, also taking into account other, similar properties in the same city or suburb. Based on the comparative market analysis, the real estate agent might then recommend that home sellers consider upgrading certain parts of the property, or repairing or renovating parts of the home. Real estate agents will not advise homeowners to spend money on renovations if these costs are not going to be consolidated when the home is eventually sold.

But what should homeowners do if they simply do not have the cash to pay for renovations or repairs to the home? While an ROI may be on the cards post-sale, this does not fund the renovations before the sale goes through.

Ways to fund a renovation to maximise the sale price

There are a great many ways to get the money to fund renovations together. Making a good first impression is key if sellers are to secure a quick sale – something that all sellers aspire to, especially in trying and volatile economic climates.

Your real estate agent will probably recommend that you undertake any repairs and renovations before the property is even listed online. This is because you want your online listing to shine, too. In this regard, it might also help to consider enlisting the services of a professional home stager and property photographer, who are experts in setting the property up in a way that will catch the eye of the broadest group of online property browsers, and understand what buyers are looking for and are looking at.

Having to spend money preparing the home for sale can be something that makes sellers nervous, especially if they don’t have the cash to undertake repairs and renovations at hand.

There are a number of financing options available to sellers, depending on their own circumstances. This article will set out a few options that sellers can consider when they are in need of cash to finance pre-sale renovations to their property.

  1. Take out a Personal Loan

If the amount of money required to do repairs and renovations to their property is not too big, securing a personal loan may be a viable option for property sellers.

At current rates, lenders are able to gain access to personal loans of between $5000 and $60 000, although the loan a seller can access will also be dependent upon their own personal financial situation and the type of loan they want to get, in addition to the purpose of the loan. Lower interest rates can make this an attractive option for buyers if they have a good credit score.

Sellers should also just remember any debt they have incurred when they are also planning on purchasing a new property after selling their current home will be taken into account when they are being assessed in order to secure another home loan.

This is applicable for the any additional type of debt, as the following financing options will also demonstrate.

  1. Use Your Credit Card  

If home sellers have a credit facility, they may also think about using their credit card to pay for repairs or renovations to their property. When this option is considered, though, they should remember that it also adds to the credit on their name.

Although credit card debt in Australia has dropped from more than $27 billion in 2019 to $20 billion at the moment, many people will still be wary to use their credit card unless they know they’ll be able to pay the money off within the interest-free period, which is usually not more than 55 days. Should they not be able to do so, they’ll be subject to extremely high interest rates on the money that is still owed, with some credit providers even charging more than 20% interest on outstanding card balances.

If a seller wants to use their credit card to pay for renovations before putting their home on the market, they should also take the overall timeline into consideration. Will all repairs be completed, and the property listed and sold within just less than two months? Unless the answer is a resounding “yes”, they must remember that the debt they incur here will also be considered when they want to take out a home loan on a new property.

  1. Refinance to Access Equity 

Refinancing the home to fund renovations to it before the property is put on the market is another way to secure the money needed to make a home an attractive option for prospective buyers.

Borrowing against a current property is a common occurrence among Australians, with up to a third of homeowners refinancing their property in order to do renovation work.

Recent figures released by the Australian Bureau of Statistics revealed that the value of home loans refinanced by mortgage holders in Australia reached higher levels than it has in years, with no less than $24 billion worth of home loans refinanced in the month of May 2021 alone. This is likely due to the fact that the average variable rates are at very low levels.

To determine how much equity a home has, sellers will have to have a valuation done on the property and then establish the maximum loan-to-value ratio required for their home loan.

Homeowners should take heed that not being able to sell the property will mean they still have to repay the home loan in full, in which case it will serve them to aim to pay off the debt in the shortest amount of time possible by increasing repayments.

  1. Redraw on Your Loan or Use a Line of Credit

A line of credit on a property lets homeowners take advantage of the equity that may have built up over time. This option is feasible for homeowners that have already paid off a significant amount on their mortgage, and can give homeowners access to sufficient capital to use for repairs and renovations to their property.

A home loan redraw facility, on the other hand, lets homeowners take out any extra repayments that they have made over the required minimum repayments on their current home loan. This option is available to homeowners who have variable rate home loans and flexible fixed rate loans. These funds can be withdrawn at any time. Homeowners can withdraw the sum total of all additional payments that have been made ahead of their scheduled repayment, less one month’s repayment amount.

These two options can provide an additional two lifelines to cash-strapped homeowners that would like to get their home ready for the market.

  1. Use a pay-after-you-sell service

If all else fails, homeowners may consider asking their real estate agent about companies and contractors that allow homeowners to only pay for renovation work once the home has been sold to new owners.

These so-called pay-after-you-sell service providers may provide homeowners with the option to pay for work within a timeframe of up to five months, depending on the company, and these payments are often interest-free.

If taking into account the average period of time that it takes for a home to sell, this can be a very attractive option for homeowners, who have a significant amount of time to settle the payment, while also being able to offer buyers a property that is spick and span.


Pre-sale renovations aren’t always necessary on properties that are being put on the market, but if they are recommended by real estate agents, they are quite likely to reap a handsome return on investment for sellers when the home is sold.

With that being said, many homeowners simply don’t have access to the cash required to enlist the services of professional tradespeople and contractors. Luckily, homeowners have access to a range of financing options to help them pay for renovations.

Sellers may opt to take out a personal loan or use their credit card to pay for renovations, but these options will add to their debt burden, which can affect their assessment for a home loan on a new property.

Refinancing their current property, along with redrawing on their current loan or using a line of credit on it are two other routes that homeowners can choose to follow. If they can find a contractor that offers pay-after-you-sell services, this can also help to relieve some of the financial pressures of renovating.

For the best selling advice, a qualified real estate agent you can trust is key. Still looking for someone to help you sell? Perfect Agent can provide a list of experienced agents that suit every requirement.