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5 Different Options to Finance Your Renovation Project

When you are a homeowner, and you know your property can use some sprucing up, it’s not as easy as working out what will happen and when to do it. Many refurbs don’t occur due to homeowners failing to find ways to finance their renovation projects.

What’s the best way to do it- should you look for a renovation mortgage? Or refinance with a home improvement loan? Or are there other options of finance that would suit your financial position better? Plus, some property owners may prefer paying in cash, which can halt any significant renovation work due to cost.

Start With Costing The Renovation Project

Remodeling jobs provide a lot of work for builders and contractors. According to Statista, remodeling expenditure in the United States amounted to $353 billion in the first quarter of 2021. Kitchens and bathrooms are the two most renovated rooms. In 2020, remodeling a master bathroom in the USA will cost around $10000 – $15000. With inflation, expect it to be closer to $20000 today.

Paying cash is doable for some property owners but not the majority making the other property renovation financing options very important. Here are the different options to finance your renovation project.

Home Equity Line of Credit (HELOC)

HELOC makes it possible for property owners to borrow against the ownership or equity they already have in their property. Most lenders will allow borrowers to get up to 85% of the total worth of their property.

For example, let us assume that your property is worth $300,000, and you have $150,000 on your mortgage. This means that your equity on the property is 50%, which is worth about $150,000. In such a case, a lender will likely give you 85% of the $150,000, which is $127,500.

A HELOC acts as a second lien of your property – essentially another secured loan.

Cash-Out Refinance

A cash-out refinance you to get a certain amount of money for your renovation project. Your original mortgage is then paid in full, and then a new total (the paid mortgage and the renovation loan) is set for a new mortgage.

For example, let us assume that your property is worth $400,000 with a mortgage of $200,000. You have an equity worth 50% of the total value of the property, while the renovation project is going to cost you $80,000. The original mortgage ($200,000) is paid in full and replaced with a new one worth $280,000. This gives you $80,000 in cash for your renovation project.

It is, however, essential to note that even though a cash-out refinance increases your mortgage balance, it comes with an interest rate that is a bit lower than the HELOC option discussed above.

FHA 203(k) Renovation Loan

FHA (Federal Housing Administration) 203(k) loans come in handy when financing your renovation project – the renovation costs are rolled over into your mortgage. It is a type of FHA home renovation loan that covers the entire renovation cost.

You will pay for the loan over time as you also pay your mortgage. FHA 203(k) loans are among the most affordable ways for property owners to pay for renovations. They also expand your property buying options, especially if you live in expensive areas.


The Federal Housing Administration insures these loans. This explains why they come with lenient or relatively more straightforward qualification requirements compared to most of the loans discussed in this article.

Cash or Savings


If you would like to use your own money to finance your renovation project, then you have to be good at saving money because you will have to cover the renovation cost. This is one of the best options since you will not pay any interest later.

However, paying for property renovation in cash is a luxury that only a few can afford. If it is a small project, such as replacing a few things in your home, it makes sense to use cash.

Depending on your money or income, you might find saving enough money for large renovation projects challenging. The good news is that you do not have to spend years saving for renovations with the financing options discussed here.

Point-of-Sale Financing

Point-of-sale financing requires you to work with a lender who has an existing relationship with the contractor working on the renovation project. This is one of the most straightforward and flexible options to finance your renovation project.

This is because you are at ease knowing that you can trust the lender as well as the contractor. The contractor is tasked with walking you through the application process, making sure that you apply for the right amount to cater to the entire project. They also help you understand the things you need to avoid during the renovation project.

In addition, the contractor ensures you get a payment plan that meets your budget. You can qualify for point-of-sale financing within minutes without any impact on your credit.


Renovating your property is not a minor concern when the investment is sizable. Finding enough money to cover the renovation cost can be challenging, especially for larger projects.

However, homes deteriorate and need maintenance and replacement, which is why there are different financing options in the market for homeowners. Get advice from your accountant and financial advisor before taking out a loan.

In addition, do your research before choosing a lender for your renovation funds. There are a lot of different loan types and providers. Plus, there are brokers, too, so be informed before moving ahead with funding. Once you have the loan you need, you can get excited about that new kitchen or addition to your home.