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What You Need to Know About Renovation Financing

Do you want to add a basement to your home? Or just feel like it’s time to update the kitchen? If so, you’ll need to find the best way to pay for your project well ahead of time.

Otherwise, your project could come to a screeching halt as your funds run out in the middle of the job. To avoid that, plan to secure the funds for every stage of the project before getting started.

Not sure how to go about getting the money you need? Here’s a look at how to get started.

Typical Budget for Bay Area Home Renovations

Home remodeling costs vary quite a bit. The total cost depends on the size of the space, material quality, and scope of the project. You can expect your remodel to cost anywhere from $10 to $60 per square foot.

When remodeling your kitchen, expect costs to land in the $25,000 to $135,000 range. Adding a basement to your home, on the other hand, often ranges between $40,000 and $150,000.

In order to figure out exactly what your project will cost, bring in the experts for budgeting and estimating services. You can then move forward with a precise figure in mind, making it easier to secure all the funds you need. 

Renovation Financing Options

Since every financial situation is unique, there’s no one right answer when it comes to financing home renovations. You can weigh the following options to see if any would work well for your needs.


If you don’t want to take on the risk of a loan or line of credit, then consider using your savings. Before you commit to this option, make sure you’ll still have emergency funds available after you pay for your remodel.

Line of Credit

A home equity line of credit, or HELOC, lets you use your home as collateral in getting a secured loan. You must have about 15% to 20% equity available to qualify. And you will likely get a variable interest rate that changes with the market.

Second Mortgage

Also known as a home equity loan, a second mortgage lets you use your home as collateral and get a loan for your remodel. Unlike the HELOC, a home equity loan usually has a fixed interest rate. With that, your payments will stay relatively static throughout the life of the loan.

Cash-Out Refinance

If you want to improve the interest rate on your home while securing funds for your remodel, consider a cash-out refinance. This option allows you to replace your mortgage with a new loan at a better interest rate plus get cashback for your project. 

Home Remodel Loan

With good credit, you might qualify for a home remodel loan with a good interest rate. Since the loan is unsecured, you do not need to back the funds with your home. You can expect a shorter repayment plan than a HELOC. So, this renovation financing option often works best for smaller projects.

Credit Cards

If you have good credit and want to upgrade one room in your home, then consider putting the charges on a credit card. You can often find cards with zero-interest deals that let you quickly pay off the balance without any extra fees. But if you don’t fully pay it off by the given date, the interest lands back on the balance.

Government Programs

As you weigh all your options, look into government programs. The HUD Title I Property Improvement Loan and the Veterans Affairs cash-out refinance program are two to consider. You will need to meet their requirements to get the funds, but it can save you money in the long run if you do qualify.

While loans do come with a lot of risks, they let you complete your project faster than saving up bit by bit. You have to reflect on your finances to make sure you can meet the repayment terms before deciding if a remodel home loan is the best choice.

When to Apply for Renovation Financing

If you want to weigh all the best home improvement loans, start your search early. Don’t go to just one lender for each option either.

Speak to many banks to find the ones offering the best rates and terms. As you chat with each party, you’ll gain the insights you need to decide how to go about financing your remodel.


Get in touch with us. We would love to help you get your project off the ground