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Home equity lines of credit, refinancing your mortgage or home equity loans — which is the most responsible way to fund that home renovation you’ve been planning? It really depends on your specific financial situation, how long you’ve owned your home, what your interest rate on your mortgage is and what your credit score is now. If you’ve got some home equity built up, if you’ve been responsible with your payments or if you’re one of the few people who have good savings habits, then you just may find that you can come up with the money for your home remodel much faster and easier than you’d ever thought possible. As you plan your upcoming renovation, here are a few different funding options so you can find the one that works best for you.

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The smartest way to pay for your home improvement project is to pay cash. Sure, that means you’ll probably need to save for the project, but there are a lot of benefits to paying cash. You’ll eliminate the additional cost of any credit or interest since you won’t have to take out a loan, plus you can build your savings with one of the many different savings with interest options. If you’re willing and able to delay your home improvement project, try talking to your banker about some savings options so that you can pay cash for the renovation. Then, when it’s done, continue saving and use it for eliminating debt, paying for another new renovation or just save it for the future. After all, you’re in the habit of saving, so you may as well keep it going.


Many home improvement stores offer their own credit cards and credit payment plans. In most cases, this will be the most expensive way to fund your remodel project. If your credit is really strong, it may be worth checking what type of interest rate you can get on a store credit card, but in most cases home equity will still be a lower interest rate. If your store offers a credit with 60 or 90 days same as cash option, and you can realistically pay it off within the same as cash time frame, then it’s a great way to go, but only if you really can pay it off quickly.

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Use Your Equity

Take the total amount you owe on your home and subtract it from the estimated value and you’ve got your equity. You can use that equity to secure a line of credit or a loan, using your home as the collateral, to pay for your home improvements. Either the line of credit or the home equity loan is a great way to get a lower interest rate option since your home is acting as collateral here, but keep in mind that you’re now looking at paying back a loan, with interest, so be sure you are in a place to take on an additional monthly payment. Otherwise, it’s best to avoid this option.

Refinancing Your Home

This is a particularly good option if you’ve owned your home for a while and you owe far less than it’s worth. If your credit is good, consider applying to refinance your mortgage for a lower interest rate. Since you’re used to paying a mortgage payment every month, you can simply leverage that payment, keep it working for you, and end up refinancing your current mortgage, getting cash back and having the same payment (or even lower) than you’ve been paying. Not everyone will qualify for this option, and it’s only beneficial if you can get a better interest rate, but if you fit into this specific box, then you’ll be happy with this very smart way to fund any kind of remodel.

Deborah Flomberg is a theater professional, freelance writer and Denver native. Her work can be found at Examiner.com.

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