Home · March 04, 2021

3 Ways to Finance Your Home Improvement

From painting and bathroom remodels to sprucing up your outdoor living with a new deck or pool, fixing up your living space has never been more popular. Maybe you're spending more days at home, and you finally have time to do that DIY project on your list. Perhaps you're adjusting to working from home, have experienced lifestyle changes or just want your home to feel, well, homier.

Whatever your reason, you'll need funding to turn your renovation dreams into reality. Start with an estimate and a firm spending budget. Then, if you don't have the necessary funds on hand, you can look for financing options.


When it comes to renovating and remodeling a house, the most common financing options are home improvement loans, home equity lines or loans, and cash-out refinancing. Here's what you need to know to choose which one is right for you.

1 Home improvement loan

A home improvement loan may be a great option if you want your funds fast (think next-day funding) and don't need a significant amount of money—say, $75,000 or less.

Home improvement loans are typically unsecured loans. This means a lien won't be placed on your home, no collateral or home equity is required, and there's no appraisal or lengthy closing process. Usually, home improvement loans offer shorter terms than home equity lines and loans.

2 Home equity lines and loans

Another financing option you can explore is opening a home equity line or loan. These are secured by your home, which means you need sufficient equity in your home to borrow against. But they usually offer longer repayment terms, and a home equity line provides the flexibility of borrowing only what you need when you need it.

3 Cash-out refinance

A cash-out refinance is a new home mortgage (that replaces your existing home mortgage) for more than you owe on your house. You take the difference between the new mortgage balance and your home's value in cash, then you can use it for whatever you want—like a home improvement, for instance.

Just like with home equity loans, you can't borrow 100% of your equity—usually, you're limited to about 80%. And because it's a new mortgage, you'll have to pay closing costs and go through a longer application process than you would with a home improvement loan. However, a cash-out refinance may make sense if you have enough equity in your home, can secure a good interest rate and would prefer a lengthier repayment period.

With financing, the choice is yours

Renovating your home can bring you great joy and satisfaction, and it can improve the quality of your daily life. The method you use to finance your home improvement will largely depend on how much money you need, how fast you need it and your willingness to use your home as collateral.

Insights

A few financial insights for your life

No results found

This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.

Links to third-party websites may have a privacy policy different from First Citizens Bank and may provide less security than this website. First Citizens Bank and its affiliates are not responsible for the products, services and content on any third-party website.