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Financing Your Dream Home Improvements: Your Options

Your dream home improvement shouldn’t take a back seat. In fact, there are many options available to help make your renovation goals come true.

When deciding on a renovation it is best to have a clear idea of your goals. The latest Remodeling Impact Report of the National Association of Realtors found that installing new roofing is the most valuable home renovation you can do right now.

But while it represents a 107% return on investment, it can cost around $7,500 on average. Adding a bathroom, for example, can set you back around $46,000—and it gets more expensive as you go for larger renovations.

So, whether it’s for increasing your home’s value for a future sale or for your immediate personal use, here are your options for financing your dream home renovation.

Save up

If you’re planning on saving up for home improvements, the best way is to open a savings account designated solely for that purpose. A savings strategy, of course, will depend on your income, expenses, and home improvement goals.

This can range from earmarking income streams or tax refunds for the project to looking for ways to cut back on expenses in order to deposit the difference into a savings account.

Credit Card

While credit cards are not the best way to borrow money, especially for large expenses incurred during a home renovation, it’s a popular choice for many.

A survey by Marcus on how homeowners will pay for their home renovations found that almost 1 in 4 planned to use their credit cards to pay off their debts.

Out of the people surveyed, 39% revealed that they were worried about being blindsided by fees—and rightly so. Credit cards have higher annual rates than the other options on this list.

But if you’re intent on using them anyway, use cards that offer a longer 0% APR period and pay it off before it ends. You should also maximize the rewards and points you can accrue in the purchases to ease the sting of interest.

Renovation loans

Depending on your credit rating, there are multiple loan options you can take advantage of for your renovation projects. Chances are, your home is on a mortgage and taking out a loan against it would be a second mortgage with much lower rates.

While that might sound daunting, refinancing your home for home improvement is more common than you might think. In fact, with mortgage rates starting to rise again, CNBC notes how refinancing activity has been recently increasing.

  • Home equity loans. If you’re eligible, lenders will allow you to take out a mortgage up to 85% of the value of your home. These types of loans typically have low-interest rates and can be paid over a longer period of time. While this is the best option, it adds the risk of foreclosure if you are not able to pay the loan back.
  • HELOC. Home Equity Line of Credits function like a credit card and usually offer a 10-year draw period. After this period, it converts to regular installment loans with your house as collateral. Unlike home equity loans, HELOCs allow you to pay back a certain percentage of your home equity during the draw period.
  • FHA-insured loans. Government programs include Title I loans and energy-efficient mortgages among others. If you’re gunning for projects like a solar panel, wall insulation, or furnace repairs, these are your best options as they typically have lower interest rates, and are federally insured.

Other loans that you can use include personal loans and collateralized loans that draw against your stocks or savings accounts. Similar to credit cards, these tend to have higher interest rates and short repayment periods.

The best option is to always get a professional opinion to find the best solution for you. If you’re looking to sell your home and wondering what home improvements are best for resale, contact one of our agents today.


Article written by Jamie Albert for Eng Garcia Properties

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4 Responses to “Financing Your Dream Home Improvements: Your Options”

  • Yes everybody has a dream of home renovation like you can say that dream home, renovation of lawn and Metal roofing is my dream, and am saving money for that your ideas or not bad and I will consider your ideas to save money for home renovation Thank you.

  • Thanks, what an informative post! Everything we need to know are found in this article. We hope you keep posting quality articles.

  • Caroline Scott
    Written on

    Getting a home equity loan is usually the least expensive option you have if you’re a homeowner and looking to finance a big home improvement project. Borrowing against your house also allows you to receive larger sums depending on the amount of equity you have in your home. This would also prevent you from getting stuck in a cycle of debt since the interest rates are much lower compared to other options, and you get to pay them back over a longer period of time. I used this as a way to build and redecorate my backyard and add a swimming pool which costed a huge amount. You can read more about this here. It made everything more manageable as I didn’t need to pay a large sum in an instant, but rather I had it financed with a home equity loan.

  • It’s hard to find knowledgeable people about this subject, but you seem
    like you know what you’re talking about! Thanks

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