Ways to Pay for Home Improvements
The short version
- Match the funding to the project: its size, how certain the cost is, and how long the work will take.
- Borrowing against your home usually costs less than unsecured credit, but it puts the home at risk.
- Get the project quoted before you decide how much to borrow.
Savings
Paying cash avoids interest and fees entirely. It fits smaller projects and anything you can plan months ahead. The caution is not to drain the money you keep for emergencies; a home project is a common source of surprise costs.
Home equity line of credit
A HELOC works well for projects paid in stages, because you draw only what each stage needs and pay interest only on that. It also gives you room when the final cost is uncertain. The rate is usually variable. See How a HELOC Works.
Home equity loan
A home equity loan pays a lump sum at a rate that is usually fixed. It fits a single project with a firm price, where you want one predictable payment.
Cash-out refinance
A cash-out refinance replaces your mortgage with a larger one. It is mainly worth considering for a large project when the new mortgage rate would be close to or below the one you have now. See our comparison of all three home equity options.
Personal loan
A personal loan is unsecured, so your home is not collateral, and funding is often quick. Rates are generally higher than home-secured borrowing and terms are shorter, which makes for a larger monthly payment. It can suit small to mid-sized projects or homeowners without much equity.
Contractor or store financing
Many contractors and retailers offer financing, sometimes with a promotional period. Read the terms closely. With deferred-interest promotions, if the balance is not fully paid by the end of the period, interest can be charged back to the purchase date.
Credit cards
Cards are convenient for small purchases you will pay off within a month or two. Carrying a renovation balance on a card is usually the most expensive way to pay for it.
Choosing between them
| If the project is... | Often worth comparing |
|---|---|
| Small and planned | Savings |
| Done in phases, or the cost is uncertain | HELOC |
| One job with a fixed quote | Home equity loan |
| Urgent, with little equity available | Personal loan |
| Very large, and current rates suit a new mortgage | Cash-out refinance |
Before you borrow
- Get more than one written quote for the work, with the same scope in each.
- Add a contingency. Projects in older homes especially tend to uncover extra work.
- Check your contractor is licensed and insured where your state requires it.
- Borrow for the project, not the limit. Being approved for more does not mean you need it.
A note on taxes
Interest on home-secured borrowing may be deductible when the money substantially improves the home that secures the loan, if you itemize. Keep your receipts and ask a tax professional how the rules apply to you.
Want to see what lenders may offer?
Answer a few questions about your home and, with your consent, we will pass your request to lenders and partners who may be able to help. It is free and there is no obligation.
See your HELOC optionsEasyHomeGuides is not a lender and does not make credit decisions. We are paid by our partners.
This guide is general information to help you ask better questions. It is not financial, legal or tax advice, and it is not an offer of credit. Loan terms, eligibility and costs are set by each lender and vary by state and by borrower.