O.P.
Hi,
My wife and I are currently deep into a very painful house renovation in the Inner West of Sydney.
Bit of a financial snapshot below:
Original Remaining Mortgage: $660K (Previous House Value Approx $1.9-$2M)
Original Renovation Costs: $900K (Construction Loan)
Joinery and a few extras such as furniture were not including in the original costings, and are likely to end up being approx $120K
We currently have approx $40K in our redraw, and approx $150K in Shares (ETFs). My wifes parents have previously hinted at being able to loan us money if we need.
How should we look to fund the remaining costs? Selling some of the shares seems an obvious choice to not go into more debt, but whats the long term impact?
My wife is currently on mat leave, total HHI when she is back at work is approx $17K a month (can be higher with commissions etc), mortgage will probably be circa $9k a month.
Any advice is appreciated
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Obviously AI – but it's quick...
Financial Snapshot Summary
•Remaining Mortgage: $660K
•Renovation Costs: $900K (construction loan)
•Additional Costs: ~$120K (joinery, furniture)
•Available Funds:
•$40K in redraw
•$150K in ETFs
•Potential family loan
•Household Income (HHI): ~$17K/month (when your wife returns to work)
•Estimated Mortgage Repayments: ~$9K/month
________________________________________
Funding Options & Considerations
1. Selling ETFs
Pros:
•Immediate liquidity without increasing debt.
•Avoids interest payments.
Cons:
•Capital Gains Tax (CGT): If held >12 months, you get a 50% CGT discount
•Loss of future compounding returns — ETFs typically return 7–9% annually over the long term
•Selling in a down market could lock in losses.
Recommendation: Consider selling a portion of ETFs if markets are favourable and you want to avoid more debt. You could also stagger sales to manage CGT impact.
________________________________________
2. Using Redraw Facility
Pros:
•Already available cash.
•No new debt or CGT implications.
Cons:
•Reduces your buffer for emergencies.
Recommendation: Use this strategically — perhaps for time-sensitive payments or bridging gaps.
________________________________________
3. Family Loan
Pros:
•Potentially interest-free or low-interest.
•Flexible repayment terms.
Cons:
•Emotional and relational risks.
•Should be documented clearly to avoid future misunderstandings
Recommendation: If you go this route, draft a simple loan agreement outlining terms, repayment expectations, and contingencies.
________________________________________
4. Additional Loan (e.g., Personal or Equity Loan)
Pros:
•Keeps investments intact.
•May offer lower interest rates if secured against property.
Cons:
•Adds to monthly repayments.
•Long-term debt burden.
Recommendation: Only consider if you want to preserve investments and family support isn’t viable. Compare rates and terms carefully.
___________________
Suggested Strategy
1.Use redraw for immediate needs.
2.Sell ETFs strategically, considering CGT and market conditions.
3.Explore family loan as a backup or partial funding.
4.Avoid new debt unless absolutely necessary.
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jb1986 writes...
likely to end up being approx $120K
Consider a Plan B where as much of this expenditure can be delayed until your wife is working again.
Are you certain that there will be no further surprise costs?
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O.P.
Else writes...
Are you certain that there will be no further surprise costs?
There have already been loads.
We are getting towards the end, gyprock walls going in this week etc, so we should be in the clear
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jb1986 writes...
Joinery and a few extras such as furniture were not including in the original costings, and are likely to end up being approx $120K
What was your original plan for these items?
Furniture I understand not including in the build costs but Joinery?
Could you have included it and borrowed for it?
I'd take the family loan over all other options listed.
Check borrowing capacity to borrow the funds to repay the family after construction is completed.
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Take the cash from the parents – pay it back slowly no interest.
I am curious – is your property now worth > 3.2 million
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jb1986 writes...
Selling some of the shares seems an obvious choice to not go into more debt
I would just sell all shares. You have a zero risk 10% "investment" option in any money that goes to reduce your loan. How much more than 10% are your shares making with the attendant risk they may drop in value at some point?
A total of $200K in your offset account saves you $2000 each month in interest payments. Plus it creates a nice buffer in the short term.
If the money is interest free from the parents then use that, but I assume it would come with interest and no point making your finance more complicated and stressful if you don't have to.
With your incomes I would be looking instead of shares to either pay a little extra in salary sacrifice as a way of investing in the share market. But mostly I would be throwing what you can at paying down the mortgage for the next few years.
As mentioned Capital Gains is something you would need to work out (Just ask AI to calculate it for you). Assuming you both hold them, they have been bought 12+ months ago and you wife being off work lowers her income this FY then it might not be a lot of tax to sell them.
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jb1986 writes...
My wife's parents have previously hinted at being able to loan us money if we need.
This is the easiest and most convenient solution, since they have already stated they can.
If they have a few million in funds (for example), it is a non issue for them. Ask your wife whether she knows her parents are wealthy.
If my son ever needed $120,000 for such a purpose, I can transfer the money to him anytime. No worries.
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O.P.
boneitis writes...
am curious – is your property now worth > 3.2 millio
Likely high 2 when done.. building costs so high atm it doesn’t translate 1 for 1
Plan is to live and hold property for a long time. We paid 1.2 for it originally so still ahead
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If family are willing/able to help then it's prob the best option. I'd just make sure you'll all very clear on the repayment terms. Money can sour relationships pretty quickly :-(
Cheers
Jamie
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pgdownload writes...
You have a zero risk 10% "investment" option in any money that goes to reduce your loan. How much more than 10% are your shares making with the attendant risk they may drop in value at some point?
A total of $200K in your offset account saves you $2000 each month in interest payments. Plus it creates a nice buffer in the short term.
What am I missing here?
Zero risk 10% return on money in your loan? No, that would only be the case if the interest rate was 10%...
Also selling the shares means capital gains tax applies (bad advice to be honest)
$200K in offset does not save $2000 per month in interest repayments either..
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this post was edited
Finance_Guy writes...
Zero risk 10% return on money in your loan?
Assuming a 6% loan and a 30%-37% tax bracket they could need a 10% return on the shares to come out roughly the same. Hopefully they should get more than that but they come with a risk. Plus they come with CGT. Depends on what shares they have.
Also selling the shares means capital gains tax applies (bad advice to be honest)
It is advise and everyone has mentioned CGT is a downside of the strategy. However unless you plan to die and never use the money you're probably going to have to pay CGT at some point – The OP is likely not invested in companies that they will end up selling at a significant loss. Again depends on just how much CGT is payable and if they do have any banked losses.
$200K in offset does not save $2000 per month in interest repayments
My mistake. It saves $2000 in repayments per month.
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O.P.
pgdownload writes...
they could need a 10% return on the shares to come out roughly the same
With dividends reinvesting, are the gains not compounded? ie: larger each year?
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pgdownload writes...
You have a zero risk 10% "investment" option in any money that goes to reduce your loan.
Assuming a 6% loan and a 30%-37% tax bracket they could need a 10% return on the shares to come out roughly the same.
Ok so where does the "10% risk free return" come from when putting the money into the home loan as you previously stated?
It's not there, you technically only get the return of whatever the home loan interest rate is, and it's easy to beat this.
My mistake. It saves $2000 in repayments per month.
Incorrect, money in offset doesn't reduce the monthly repayment on a P&I loan. It simply reduces the interest portion, monthly repayments remain the same.
Anyway, even if the $200K was put into the loan itself, it wouldn't reduce the monthly repayment by $2000 either, not sure where you're getting your figures from but it's incorrect all round.
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O.P.
Finance_Guy writes...
What was your original plan for these items?
Furniture I understand not including in the build costs but Joinery?
Original costs from builder were super high, to get the job started the architect recommended taking that out and ‘dealing with it later’ getting other quotes, which is now
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jb1986 writes...
Original costs from builder were super high, to get the job started the architect recommended taking that out and ‘dealing with it later’ getting other quotes, which is now
The architect advised this? Wow, I've never heard of such a thing.
Do you have the ability to borrow additional funds from the current lender for the remaining works?
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I am wondering whether you are going to be using the wife’s parents to provide free childcare, as so many people do. Speaking as a grandparent myself, I would think that using them to provide childcare as well as fund the balance of your renovations could build up some resentment on their side.
I would be looking at borrowing a smaller amount from them and selling a portion of the shares.
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this post was edited
You have another option. Selling your house and getting a smaller one that gives you more financial freedom. At the end of this process you will owe 1.5 million plus, with about say 800- 1000k in equity assuming an increase in your house value. But against your income nearly 50% will go to your house repayments, thats not much wiggle room.
In the long run, there is nothing like the resentment of a house that owns you on your marriage especially when combined with a toddler and renovations. It's easy to fall into the great Australian trap of overextending on your mortgage, throwing everything into the house, and constipating your ability to grow and build financial security.
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jb1986 writes...
My wife is currently on mat leave,
That means there is a chance to realise capital gains from the ETFs with lower taxation than in later years.
Depending on how long she will be on leave and what her income will be this financial year, you could look at realising some capital gains while her income is low. It depends on a few things, most importantly, whose name are the shares in? What is her annual income and, thus, marginal tax rate, likely to be this year?
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If you can spend less now it will relieve some financial pressure for years to come.
Defer some costs. Use the furniture you have now, buy some second hand.
Don't do all the joinery straight away. You can live without full wardrobe fit outs in every bed room, laundry, Butler's pantry etc. , build some simple shelves yourself or use IKEA or similar.
Second hand kitchens can be surprisingly good, as can IKEA or Bunnings kitchens.
I know the desire to finish a renovation with everything perfect is strong but imho it's a fairy tail most people would be better off without.
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