How will you pay for a renovation?

Cash or Credit Card
Paying cash remains the most straightforward approach for funding your remodel. You’ve saved up to cover the renovation costs, and you simply make payments at key project milestones as work progresses. No interest rates, no loan applications, no monthly payments afterward. You own the improvements outright from day one, and there’s no risk of your home serving as collateral.

Home Equity Line of Credit (HELOC)
A HELOC works similarly to a credit card but uses your home’s equity as collateral. Banks typically allow you to borrow up to 80-90% of your home’s current value, minus what you still owe on your existing mortgage. The remaining amount becomes your available credit line. For example, if your home is worth $500,000 and you owe $250,000 on your mortgage, taking 80% of your home’s value gives you $400,000. Subtract your mortgage balance and you’d have access to roughly $150,000 in credit. You only pay interest on what you actually use, making it flexible for projects with varying costs or timeline changes.

Home Renovation Loans
Construction loans are unique because they consider your home’s future value after improvements, not just its current worth. These loans work well for major additions or renovations that will significantly increase your property value. Here’s how it works: if your home is currently worth $500,000 and you owe $400,000, you might not qualify for enough traditional financing to fund a large addition. However, if that addition will bring your home’s value to $700,000, a construction loan could allow you to borrow against that future $700,000 value. You could potentially access $560,000 (80% of the future value), minus your existing $400,000 mortgage, leaving you with $160,000 available for the project. Construction loans require more paperwork and planning, but they can make larger projects financially possible when other options fall short.