How to finance your home renovation project

It happens suddenly – one day, you start hating the colour of your bedroom walls, kitchen countertop, or bathroom sink. The look of your home no longer satisfies you. You’re not the only one feeling this way. Many homeowners choose to improve their homes at some point. And that’s understandable, as renovating can enhance your home’s value. Actually, interior design impacts your mental health, so creating the ideal environment is indeed essential.

But home improvements can be pretty costly, and if you don’t have piles of money lying around, you may wonder how you can pay for the renovation. Fortunately, financing your home renovation project is possible without upending your budget. But before you start planning a design, it’s wise to determine your budget and timeline. Do you want to begin remodelling in the following weeks? Or is it okay for you to start it next year? If you have flexibility regarding timing, you may be able to save up for your project. Once you’ve made up your mind regarding these two aspects, you can move on to the financing options. We outlined various options for paying for your remodelling project to make things easier for you. 

Credit card

If your remodelling project requires small changes – such as replacing bathroom tiles instead of the whole plumbing system – using a credit card may be a suitable option. Numerous credit cards offer either low or no interest rates during the first months. And if you can pay for your project in just a few weeks rather than a few years, it may be possible to avoid owing an interest. 

Plus, financing with a credit card allows you to earn rewards. If your credit card provides excellent points or cash-back for your spending, this can help you reap the benefits. Supposing you aren’t in a 0% introductory time of annual percentage rate, it’s best to pay off the home project as quickly as possible. As opposed to other financing options, credit card rates can be significantly high, and the sooner you pay for your project, the better it is. 

Mortgage refinance

If you want to avoid getting a loan for your home remodelling, a cash-out refinance allows you to get thousands of dollars for your project. With this mortgage refinance, you can tap into your house’s equity, namely your house’s value minus the additional mortgage balance. You obtain a new mortgage with an impressive balance higher than your actual one, and the difference between the loans is paid in cash. You can receive cash-out refinance if your home’s equity is at least 20%. The reason for it is that this type of financing poses risks to lenders.

A cash-out refinance is ideal for larger projects, such as room addition or kitchen remodelling. However, if you want to make minor changes, like replacing your front door, a rate-and-term refinance may be better, allowing you to reduce your monthly payment and save money. This refinancing method enables you to change the original mortgage with one of a lower interest rate. But it’s worth noting that this option will reduce your monthly payment only if you increase your loan term. 

Home equity loan

A home equity loan is another efficient option to finance a significant project. You can get a home equity loan if your home has at least 20% equity. Supposing your home value is $200,000, you need at least $40,000 in terms of equity. When getting this type of loan, you receive a lump sum of money. Similar to a first mortgage, you may need to pay closing costs, such as origination fees, loan-processing fees, etc. 

Home equity loans work like fixed-rate mortgages – you have to repay the loan with monthly payments over more years. Generally, there is a fixed interest rate, and since the loan is secured – your home is collateral – you may get a lower interest rate than with a personal loan. However, interest rates are usually higher than standard mortgage rates when it comes to home equity loans. And if you miss payments, your lender could take ownership of your home. Supposing you know the exact amount of money you need and a predictable repayment schedule suits you, a home equity loan may be a smart solution for your renovation project. 

Personal loan

If you want to avoid using your home as collateral or your home lacks sufficient equity, getting a personal loan is another way to pay for the remodelling. Finding a personal loan is generally effortless, as many credit unions, lenders and banks offer them. You can even look for personal loans online in your location to ensure you opt for the best rate. For instance, you can look for loans in Canada and weigh down your options to make the smartest choice. Or visit here to see more options.

It’s worth mentioning that personal loans are unsecured, as you can’t use your home or other assets as collateral. The interest rate depends on your credit score, and having a high score increases your chances of getting a lower interest rate. However, just as in the case of a mortgage or another considerable loan, it’s wise to compare rates from several lenders until you make a final choice. 


If you don’t want to deal with interest, loans and fees, you can also pay for your home remodelling project in cash. However, this option makes sense only for smaller projects. Or another alternative is to pay only for a part of your home remodelling in cash. In both cases, paying in cash can help you reduce additional expenses that come with refinancing or getting a loan. 

However, paying in cash requires patience, and you need to be disciplined if you want to save money for your remodelling project. But waiting until you have enough money to cover the expenses isn’t realistic every time, and it’s not even suitable for some situations. This is why you should not delay essential repairs for a long time. An example of such an issue is a leaky roof – if you ignore this issue, it can worsen and thus, you’ll need more money to fix it.

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