Checks and Balances: Financing Home Renovations and Repairs

Are you planning a home renovation?  If so, one of the main factors that you will be considering is how best to get access to the funds.  Renovations range in size from a quick design overhaul of the living room to a new extension, and the price of different renovations will vary dramatically.  But how best to pay for them?  Here are some ideas to keep in mind.


Think Before You Renovate

Before you even start to think about how you will pay for your renovation, decide whether it really is worth it.  Will it add value to the property?  Is it a necessary item or job?  For example, the installation of new HVAC products may not be the sort of thing you want to wait around for, whereas a new carpet may be something that you can put off to another day.

Try to avoid taking out a loan or spending your savings before you think about the amount that it will cost and whether you really need it.  Avoid jumping into any decision because it could end up being expensive and increasing your debt, and that is not a decision you want to take lightly.

With that in mind, here are a few ways that you could finance your renovation.


Your Own Cash

The simplest way to finance small renovations is often with your own money.  If you have some savings, this can provide you with a simple and cheap way to pay for the work.  The problem with this is that you may not have the amount required for the renovation, or you may not be prepared to spend time saving up for it, which can be difficult if you really need to carry out some work or you have your heart set on something.

Checks and Balances: Financing Home Renovations and Repairs

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renovations by in pastel, on Flickr.  This work is licensed under a Creative Commons Attribution 2.0 Generic License.


Borrow on Your Credit Card

Credit cards provide a simple way to get access to a small loan, which may be all you require for the work you want to carry out.  Again, this option is usually more suited to smaller projects, and remember that credit card debt can be expensive.  It is best to use this option only if you are certain you can pay back your loan within a relatively short period of time.


Home Equity Loan

A home equity loan can be an excellent way to get access to funds for renovation.  It involves borrowing against the equity of your home, and you may be able to borrow up to about 80% or more of the equity.  Interest rates are often variable with this type of loan, so the amount you pay back could go up or down depending on the market.

This is a good way to get access to funds for renovations when you need it because you do not have to take out the entire loan.  You can therefore just make use of it when you need it over the period of the loan, making it a potentially suitable option for smaller projects.


Renovation Financing

This may be an option if you do not have much equity in your property.  It involves getting a loan based on what the house is going to be worth when the renovation has been completed.  You will therefore refinance your current loan, adding on the amount you need for the renovation work.  This can be a good way to increase your home’s value, and you can spread out the cost of the renovation over the loan’s term.


Cash Out Refinance

Cash out refinance is when you get financing for a renovation, and this is then turned into a new mortgage.  You often need to have equity in your property, and you are then given a new mortgage that includes the value of the renovation.  This type of loan increases your mortgage balance, but it usually comes with a set interest rate, and it can often be a cheaper option than a home equity loan.


Carefully Consider Your Options

These are just a few of the options available to you for financing your home renovation.  Other options also exist, such as withdrawing cash from your retirement account or taking out a personal loan.  Always think carefully before making any decisions, and remember to ask yourself whether you really need the renovation and whether you can afford it before making any big decisions.


Christina D. Tidwell is a financial advisor.  She likes to write about the things that work best for families.  Her articles appear mainly on lifestyle and family sites.

Ian Lee

Ian Lee is a freelance writer and content marketer specializing in the areas of business, finance, and economics. Prior to venturing out on his own, he had over 5 years of professional experience in investment banking. You can find him at

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