How To Finance Home Renovation? A Detailed Guide

How To Finance Home Renovation? A Detailed Guide

Homeowners in New York have developed a newfound interest in bathroom remodeling and home renovation projects. In the United States, the estimated spending on home improvement projects, including bathroom remodeling in New York, will be approximately $485 Billion in 2024.

Everyone wants to keep their homes updated by adding or subtracting features, especially focusing on enhancing their bathrooms.

Cost Estimation for Home Renovation:

Before you think about how to pay for home remodeling, estimate how much money you need for it. Ask yourself some questions like: Is it a large-scale remodeling or a touch of renovation? Add 10% more to this estimated figure, just in case. Sometimes, raw materials prices fluctuate, or you face unexpected spoilage.

How to Finance Home Renovation?

Once you are clear about the work you need to do and how much money it will take, let’s move on to the problem of how to finance home renovation.
We have short-listed the following home renovation financing options:

  • Personal Savings
  • Credit Card
  • Home Improvement Loan
  • Home Equity Line of Credit
  • Home Equity Loan

5 Ways to Finance Home Renovation

Personal Savings

Using your savings is the ideal scenario for home renovations. Since using your own money involves no other parties, no interest rates, or bank applications, if you have cash, go for it. But it’s not that easy.

Remember your safety net. Keep an amount aside for emergency purposes. Also, home renovators tend to go over budget and lose sight of their funds.

Using cash is the safest option yet possesses the risk of overspending and leaving nothing behind, causing trouble in other daily affairs.

Furthermore, what if you don’t have a big chunk of money in your bank account? You have to wait longer for the remodeling. First, gather up money and then spend it at home. It takes a long time; it is better to look at other options.


  • No interest
  • No payback
  • Safest option


  • Might cause a delay in the renovation
  • Can run out of cash midway
  • Possibility of overspending

Credit Card

A credit card is a wise option for making small changes in the home, like installing a vanity or closet. Some credit cards offer interest-free introductory periods. You can use the credit card for repairs and renovations and repay before the initial period ends to save yourself from the interest.

The downside is that if you fail to repay within this interest-free period, you will accumulate a high-interest debt. Plus, credit cards have variable interest rates, which change with the market conditions.

It is preferred to make small purchases with a credit card so you can shun the risk of overspending and high interest. Still, there are generous reward structures and cash-back perks that you can avail.


  • Exceptional reward programs
  • Withdraw the amount as much you need, not a lump sum disbursement


  • Repay within the billing cycle
  • Only for small renovations

Home Improvement Loan

To understand the concept of a home improvement loan, consider it an unsecured personal loan. Many online lenders, banks, and credit unions can lend you a certain amount of money. These loans are purely for home remodeling, renovations, repairs, and improvements.

By unsecured, it means that you do not need to use your home as collateral. Home improvement loans are given based on your credit score. The range of this loan varies from $1000 to $100000. It has a fixed interest rate and monthly repayment plan.

Once you enter a contract with a lender, the loan amount is given to the borrower upfront. So you can start the remodeling or renovation project immediately using these funds. Then, you must repay the loan with a fixed monthly repayment amount and interest rate.


  • Shorter repayment timeline
  • Quick funding
  • Best for small-scale renovations
  • No or lower fees


  • Lower loan amount
  • Higher interest rates
  • Mainly based on credit score
  • Additional fees on late payment

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit is a secured loan where you give your house as collateral. It allows you to gain more money for home remodeling with comparatively lower interest rates.

HELOC also comes in the category of revolving credit. It means you can access a certain amount of money, which is your credit limit. Use some amount and repay, and your credit limit again goes to the original amount, just like a credit card. It means borrowing money repeatedly up to a set amount.

Remember that you are using your home as collateral, so if you fail to repay the amount, your home is at stake. Circumstances happen when you face unexpected loss of income stream and find yourself in a tight spot. Therefore, commit to HELOC only if you are sure of a smooth monthly repayment plan.


  • Suitable for bigger projects
  • Lower interest rates
  • Longer repayment timeline


  • Variable interest rates
  • Risk of foreclosure
  • Overspending is possible since it’s a revolving credit

Home Equity Loan

The home equity loan is known as a second mortgage, where you use your existing equity to take a loan. It is not a revolving credit line. The lender gives out a fixed lump sum amount to the borrower, and the borrower repays a fixed monthly installment spread over many years.

Like HELOC, a home equity loan is also a secured loan, which means you put your home as collateral. Further, make an accurate estimate of the money needed for remodeling to the dot because you want to avoid paying an interest rate on the money that wasn’t needed for the project.


  • Higher borrowing limit
  • Longer repayment period
  • Fixed interest rates
  • Suitable for medium to large renovation projects


  • Must have a good credit score
  • Risk of losing home


Homeowners worry about the limitation of how to finance home renovation. Financing home renovation has now become accessible for all sorts of remodeling projects. Opt for credit cards or personal savings for small scale renovations. Home improvement loans are best for quick transfer of funds.

While HELOC gives you an opportunity of revolving credit with lower interest rates. Last but not the least, home equity loan is a lump sum disbursement for renovations like mortgage.

Depending on the scale of your remodeling project, your credit score, and your home equity; you can select any method to pay for home improvements.

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