Planning
How to finance a home renovation.
Most homeowners pay for a renovation one of four ways. Which makes sense depends mostly on your credit, how much equity you have, and whether the project is one defined job or an open-ended one.
The main options
A revolving line against your home’s equity, usually variable rate. Good fit when the final cost is uncertain or the project happens in phases. Typically needs 15-20% equity and a credit score around 680+.
A fixed-rate lump sum against your equity, paid back on a set schedule. Good fit for one clearly-scoped project where you already know the number.
Your whole mortgage is replaced with a larger one; the difference comes to you in cash at closing. Higher closing costs since it’s a new mortgage, and it gives up your current rate if it’s below market.
Faster to get, doesn’t touch your equity, but costs more — average rates have run well into double digits, and borrowing limits are lower (often capped around $35,000).
A rough way to choose
- Small or unplanned cost? A personal loan or, for very small jobs, a credit card — just be realistic about carrying a balance at a high rate.
- Ongoing work with an uncertain final number? A HELOC’s draw-as-you-go structure fits better than a lump sum you might not fully use.
- One large, clearly scoped project? A fixed home equity loan or cash-out refinance, depending on how your current mortgage rate compares to today’s rates.
- Buying a fixer-upper? FHA 203(k) and Fannie Mae HomeStyle loans are built specifically to bundle the purchase and the renovation into one mortgage.
Why getting real quotes first still matters
Every one of these options works better with a real number in hand, not a guess — lenders ask for one, and you can’t realistically compare a HELOC against a cash-out refinance without knowing what you’re actually financing. Getting a few contractor ranges before you apply for financing, not after, puts you in a much stronger position either way.
General information based on 2026 lender and industry sources, not financial advice — rates and terms change and vary by lender. Compare real offers from your own bank or credit union before deciding, and talk to a financial advisor for guidance specific to your situation.
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