How To Afford Your Next Home Renovation


There is little doubt; home renovations can cost a lot. Finding ways to afford them requires some knowledge and investigation. The type of financing you choose will depend not only on your financial situation but the reason for the renovation.  Some renovations are necessary if the home is outdated or the home requires repair, and others are purely for enjoyment. Whether you’re upgrading or maintaining, you are investing in your property. You want to do it smartly.  If you are interested in making improvements or repairs to your home and don’t have the cash outright, here are some are the most common ways to finance a renovation.

Builder Financing

Many companies offer this strategy and can offer special promotions such as zero-percent financing for a set number of months or no payments or interests for a period of time. With these types of offers, you must pay attention to the details. The financing may be easier to obtain than a bank, but the interest rates can be high. Typically, if you don’t pay off the loan within the promotional period, interest is charged all the way to the beginning of the loan.  Specific company and builder financing can handle specific renovations such as new HVAC systems, upgrading bathrooms, or installing a pool. A pool loan is a great way to update your home and pay over time. This type of financing will most likely not be tax-deductible.

Home Equity Loan

If you have equity in your home, consider a home equity loan. For these types of loans, your home is used as collateral, just like your mortgage. In some cases, the loans are tax-deductible, which can be advantageous over other non-secured financings such as a personal loan or credit cards. Basically, a home equity loan allows you to take a portion of the equity in your home as a cash sum which you can use for your renovations. Home equity loans can be used for anything. If the money is used for home improvement or repair, the loans may be tax-deductible. 

AdvertisementBuild online presence with trusted marketing software (en)

Home Equity Line of Credit (HELOC)

These loans are similar to the home equity loan. The difference here is that you have a line of credit up to the limit that the bank is borrowing you on your equity. You draw down the loan as you need it to pay for repairs or renovations. You pay interest on what you've drawn down and will need to finance the loan in a set period of time. These types of loans are good for longer-term projects or projects done in stages. If you use the funds for home improvement, it may be tax-deductible.

Cash-out Refinance

Interest rates are at historic lows. This can be a great option if you have a higher interest rate and equity. With this strategy, you refinance your existing mortgage for more than the balance and take the cash difference.

Credit Cards

Be careful as credit cards can charge very high-interest rates. But if you require repairs and you have no equity, this might be an option. Shop around for promotions and the best interest rates.

Personal Loan

This may be an option for those with lower-cost renovations and short-term needs. These types of loans are not tied in any way to your home. You’ll need good credit. The money can be used for anything, but keep in mind, the loans will most likely not be tax-deductible.  

Veteran's Administration Loans

Home improvement loans and mortgages are offered through the Veteran's Administration to qualified borrowers. They offer competitive interest rates and lower fees. You can complete an application online at to see if you meet the qualifications. The loan will be secured with your home and maybe tax-deductible.

If you‘re in the market to renovate your home or a part of your home, these ways are the most common ways to afford the improvement costs. Always consider how much you can afford each month in payments before making any decision, and then shop around for the best rates and terms.