Planning Renovations? Here’s How to Use Your Home Equity to Pay for Them

Thinking about upgrading your kitchen, finishing the basement, or adding that extra bathroom you’ve always wanted? Renovations can boost both your home’s value and your enjoyment of the space—but they can also come with a pretty brutal price tag.

One of the most common ways homeowners fund renovations is by tapping into their home equity. Here’s how it works.

What is Home Equity?

Home equity is the difference between what your home is worth and how much you owe on your mortgage. The longer you’ve owned your home and the more you’ve paid down your mortgage, the more equity you likely have available.

Most Common Options for Accessing Equity

1. Mortgage Refinance

You can refinance your mortgage and borrow up to 80% of your home’s value. This gives you access to a lump sum of cash at mortgage rates, which are usually much lower than personal loans or lines of credit.

2. Home Equity Line of Credit (HELOC)

A HELOC works more like a credit card. You can borrow what you need, pay it back, and borrow again as needed. Payments are typically interest-only, and rates are tied to prime.

Why Use Home Equity for Renovations?

• Lower interest rates compared to unsecured loans or credit cards
• One payment if you refinance, instead of juggling multiple loans
• Opportunity to increase the value of your home with well-chosen upgrades