When it comes to home remodeling, even small and medium sized DIY projects can grow to be very costly. If you’re considering a major renovation like a kitchen, bathroom upgrades or a home addition, you could be looking at an investment of $50,000+. There are several options to carefully consider before you finance your next home remodeling project.

image of wood being cut with hand-held circular saw

We’ve outlined the most popular options that homeowners consider before they begin a home renovation. It’s up to you to be cognizant of your unique financial situation and do what is best for you and your family. With any large investment, you should consider all outcomes and choose the direction that suits you best.

Option 1: Use Cash

Paying cash is almost always the best option when it comes to financing a home improvement project (versus taking out a line of credit). However, it’s not realistic to assume most homeowners have the funds for a major kitchen renovation sitting around. In many cases, it could take years for you to save the amount of money you’d need for an extensive home renovation.


We recommend using cash if you have it, or even using partial cash to offset how much you’ll need to borrow. This is the safest option, but there are plenty more.

Option 2: Consider Low Interest Credit Cards

If you’re a homeowner, you’ve likely been teased with countless credit card offerings over your adult lifetime. If you’re credit is healthy, there is nothing wrong with putting small and medium sized home renovation projects on a zero perfect interest or low interest credit card.

They key here is to obviously pay this off quickly, so we don’t recommend putting a $20,000 project on a Visa. Honestly ask yourself, will I be able to pay this off before the credit card offer expires and I start to accrue interest? If you’re uncertain in any way, don’t do it.

But if you know you have great credit, and can pay off the balance in the right amount of time, we think this can be a great option for you.


Option 3: Refinance Your Home

If you’ve been in your home for quite some time, and your current interest rate is higher than the rates of the market, a refinance could be a great option for you. Refinancing will lower your interest rate and thus your monthly mortgage payment, giving you some financial wiggle room to make home improvements.

image of multi-level house

Consider this option carefully. When you refinance, you’re using your home as collateral against a larger loan. It’s best to make improvements that will boost your home’s value, so be sure to review the expected cost recoup of various home remodeling projects before getting started.

Option 4: Take Out a Personal Loan

Personal loans have pros and cons. One large pro to personal loans is that they don’t require you to trade your home as collateral or use it’s equity to complete your dream renovation. Some cons to taking out a personal loan for a home improvement project is that the interest rates can be higher. You’ll also need excellent credit to be approved and personal loans need to be paid back, on average, within 5-7 years.

Option 5: Apply for a Home Equity Line of Credit

Also known as HELOC, a home equity line of credit uses the equity in your home to fund the project.

According to Nerd Wallet, “A home equity line of credit, so often referred to as a HELOC, is a convenient way to draw on the value of your home — and tap the equity only as you need it. That’s a good thing, because your home’s long-term value can be a real wealth-building tool.”

image of person filling out a form

If you do this the right way, the advantages can be plentiful. One huge benefit is that HELOC funds used to improve your home may be tax-deductible. Be sure to consult with a HELOC lender to fully understand all of your options. Nerd Wallet shares a few HELOC lenders that are worth considering.

Option 6: Construction Loan

These traditionally short-term loans can be a bit restrictive, but they also offer relatively low interest rates and smaller initial payments. Speciality versions like FHA construction loans and VA construction loans offer flexibility for qualified borrowers, but according to Bank Rate, there are two main types of construction loans:

Construction-to-permanent: You borrow to pay for construction. When you move in, the lender converts the loan balance into a permanent mortgage. It’s two loans in one.

Stand-alone construction: Your first loan pays for construction. When it’s time to move in, you get a mortgage to pay off the construction debt. It’s two separate loans.

Option 7: Reverse Mortgage

For homeowners 62 years of age or older, a reverse mortgage can be a great option. We’ve discussed aging in place renovations numerous times as part of a larger approach to universal design, and have helped dozens of San Diego homeowners increase their safety and comfortability at home.

A reverse mortgage can more expensive than a home loan or line of credit, but you don’t have to pay it back until you sell the home.

image of home interior

Ready to start the conversation?

Contact us today to schedule your FREE in-home or virtual consultation.

Contact Murray Lampert