How to Finance Your Dream Home Remodel

Thinking about upgrading your kitchen, building a backyard oasis or tackling a long-overdue repair? Home renovations can be exciting, but they’re rarely cheap. The good news: You may not need to drain your savings or take out a personal loan.

Two common options — cash-out refinancing and home equity lines of credit (HELOCs) — can help you tap into your home’s value to fund your plans.

Home renovations may seem like a pipe dream in today’s economy. But the average mortgage holder has $319K in home equity — $207K of which is tappable. That’s a lot of purchasing power, and accessing it may be easier than you think.

Here’s how each option works:

Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a new, larger loan. The new loan pays off the original, and the difference between the two goes to you in cash. You can use it for home improvements, debt consolidation or other needs.

Before refinancing, check your interest rate. If your new rate is higher than your existing one, a refi may not be your best option.

HELOC

A HELOC lets you tap into your equity without replacing your existing mortgage. Since it’s a second mortgage, you’ll keep your current rate and have a second monthly payment.

Most HELOCs come with a variable rate and a 10- to 15-year draw period, during which you can borrow funds as needed while making interest-only payments. After that, a repayment period begins with monthly payments on both principal and interest.

Which One Is Right for You?

Cash-out refis tend to offer lower rates and simpler repayment, while HELOCs give you long-term flexibility. The right fit depends on your financial situation, goals and timeline.

Still have questions? Reach out anytime to talk through your options.