How to Finance Your Property Renovations: 5 Different Options to Consider


The right renovation can boost your property’s value, optimize its square footage, improve your home’s functionalities – and even offer a whopping average ROI of over 60%! But, if you have been delaying getting started on your project, you are not alone. 

Most renovation projects come with upfront costs that would put off even the most motivated of homeowners! Luckily, there are several finance options that can help you fit a renovation project into your current budget. Start with the ones below. 

Take Out a Home Equity Line of Credit 

Over three-quarters of Americans believe that real estate is the safest and most beneficial investment. After all, owning your own home can be an important step towards financial freedom and long-term wealth. But even more importantly, holding equity in a property can give you access to a wide range of financial benefits. 

For example, if you hold at least 20% equity in your home, you may be eligible for a Home Equity Line of Credit – also known as HELOC. A HELOC allows you to access a revolving credit line that often has low and tax-deductible interest rates and can be used to cover large expenses. HELOCs are secured by your property, using it as collateral in the case of missed repayments.

Apply For a Home Equity Loan

Another way to use your home equity to finance your renovations is to apply for a home equity loan. These loans, also known as second mortgages, allow homeowners with a minimum equity of 20% and a loan-to-value ratio below 80% to use their home’s equity to secure the funds necessary for a renovation. 

What you need to know about home equity loans is that they come with associated closing costs similar to the ones of your first mortgage – which can amount to 2-5% of the loan’s value. These loans might not offer the lowest interest rates, but, unlike a revolving line of credit or credit cards, they provide borrowers with the benefit of an expected and regular repayment schedule. 

Consider the Benefits of a Cash-Out Refinance 

Cash-out refinance is an excellent option to upgrade your current mortgage, benefit from more favorable terms, and take advantage of today’s low interest rate environment. 

But what’s even more important is that refinancing your mortgage can help you get some extra cash that you can use to pay for your property renovation. It’s a win-win situation!

Use Your Credit Card

If you can keep expenditures within the 30% utilization rate and repay your balance within weeks, credit cards provide a much more accessible and straightforward alternative to loans or mortgages.

What’s more is that your credit card provider might offer rewards, bonuses, and 0% APR for a few months or weeks. Using your credit card to pay for a renovation project during this period can help you enjoy the greatest benefits without having to worry about high interest rates.

Pay For It in Cash

Loans, mortgages, and lines of credit can help you finance your property renovation without having to face steep upfront costs. But if you have enough cash to cover the costs of the project, paying out of your pocket can help you avoid added fees, penalties, and repayment schedules. 

If you are looking to renovate on a budget, paying for all or a percentage of your project in cash can help avoid interest and save up to 6% on closing costs.

Taking Out a Mortgage: How Much Will it Cost?

Taking out a loan or mortgage is the most popular way for homeowners to finance a home renovation. And, with the right financial product, this solution is perfect for homeowners to avoid large upfront costs, take advantage of high returns, and enjoy affordable monthly rates. 

However, before diving into the search for the right loan, it is crucial to understand what to expect from monthly repayments, associated fees, and the length of the agreement. 

A mortgage calculator can help you better understand how a mortgage will impact your financial situation, what to expect from monthly repayments, and what kind of interest rates you’ll be able to secure. Once you know all this, it is much easier to choose a mortgage product with confidence. 

Bottom Line

Renovation projects can impact several aspects of your life, from your home’s value to your property’s livability and insurance costs

If the aspect that has been putting you off from renovating your kitchen or bathroom is the project’s upfront costs, you could take advantage of the strategies seen above. But don’t forget to consult your financial advisor before taking this important step. 


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BDC 314 : Mar 2024