The average major renovation costs $50,000 to $150,000. Most homeowners don't have that sitting in a savings account, and shouldn't necessarily use it if they do. Choosing the right financing structure can save tens of thousands of dollars in interest and preserve your liquidity for the unexpected. Here's what to know.
Option 1: HELOC (Home Equity Line of Credit)
A HELOC lets you borrow against your home's equity up to an approved limit, drawing only what you need when you need it. Current rates (2026) are in the 7.5 to 9.5% range depending on credit score and LTV. HELOCs are ideal for phased renovations where costs are spread over time — you only pay interest on what you've drawn. The draw period is typically 10 years.
Option 2: Home Equity Loan
Unlike a HELOC, a home equity loan gives you a lump sum at a fixed rate (currently 7.8 to 10.2%). It's best when you have a clear, fixed project scope and know your total cost upfront. Predictable monthly payments make budgeting easier, so make sure you've properly scoped the project before borrowing.
Option 3: Cash-Out Refinance
If your current mortgage rate is already above market, a cash-out refi can fund your renovation while potentially lowering your rate. If your original rate is below current market (likely if you bought pre-2022), a cash-out refi will increase your monthly payment significantly and is usually not worth it.
Option 4: Renovation Loan (FHA 203k / Fannie Mae HomeStyle)
For homebuyers purchasing a fixer-upper, or homeowners with limited equity, renovation loans roll the cost of improvements into the mortgage. The FHA 203k and Fannie Mae HomeStyle programs are the most common. They require more paperwork and a certified appraiser to establish post-renovation value, but they allow you to finance renovation costs you couldn't otherwise afford.
The Cash Option: When It Makes Sense
Paying cash makes sense when the renovation is small (under $30,000), you have a true 6-month emergency fund after paying for it, and the renovation will meaningfully increase home value or quality of life. Never deplete your emergency fund for a renovation.
Whatever financing you choose, RenoSpend helps you set your total budget, track every draw, and ensure your money is going exactly where it's supposed to.
