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# Have Renovation Plans? Find a Way to Finance Them

August 19, 2026  

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## More Space or Greater Comfort? Financing Can Help

Did you buy a home that needs renovation? Or are you already living in a house that's ready for an upgrade? Either way, renovating can make your property more comfortable and better suited to your lifestyle and needs. But the question is: how do you pay for it?

If you’re planning a renovation, expect to spend a few thousand dollars for smaller updates to a much larger investment for structural work or extensive remodeling. Sometimes, paying the entire amount from savings may not be practical, and using a credit card can become expensive.

However, homeowners and buyers can use several financing options. The choice depends on the cost of the project, how much equity you have, whether you are purchasing or already own the home, and how you prefer to receive and repay the funds. In this article, you’ll explore some of the most popular ways to cover renovation costs.

## 1. Consider a Renovation Loan

This type of loan may be the right choice when you want to finance the property and the improvements together rather than arrange separate financing later.

Certain renovation mortgage programs enable eligible borrowers to include home renovation expenses in a purchase or refinance loan.

One such option is the [HomeStyle Renovation mortgage](<https://singlefamily.fanniemae.com/learning-center/originating-and-underwriting/homestyle-renovation-mortgage?>) offered through Fannie Mae, a government-sponsored enterprise that supports the U.S. mortgage market.

A renovation loan can be particularly useful when buying a property that needs work from the beginning. Instead of purchasing the home first and then looking for funds to renovate it, you may be able to address both needs through one financing structure.

You should understand that [renovation loan programs](<https://lbcmortgage.com/blog/renovation-loans-paying-out/>) have their own eligibility, property, contractor, appraisal, and project requirements. So make sure the scope of your renovation fits the program before choosing it.

## 2. Use a Home Equity Loan

Have you built substantial equity in your property? With a[home equity loan](<https://lbcmortgage.com/home-equity/>) (HELOAN), you may receive the funds you need without replacing your existing first mortgage.

A HELOAN allows you to borrow against the difference between the property’s value and the amount you still owe.

You’ll have the funds in the form of a lump sum, making things easier when you already know approximately how much your renovation will cost. Since the loan is secured against your property, it is important to ensure it fits comfortably within your budget.

## 3. Choose a HELOC for a Project With Changing Costs

We understand that not every home renovation has a predictable budget. Contractors may uncover additional work, and materials can change. Sometimes homeowners expand the project once construction begins.

A[Home Equity Line of Credit (HELOC)](<https://lbcmortgage.com/home-equity/no-tax-return-home-equity-line-credit-heloc/>) works differently from a home equity loan. Instead of receiving one lump sum, you receive access to a credit line secured by your home equity and can generally draw funds as needed during the applicable draw period. A HELOC is a top choice for renovations completed in stages. You borrow when expenses arise rather than taking the entire amount at once.

But keep in mind that HELOC structures and rates can differ, so we recommend you review how the interest rate works, how long the draw period lasts, and how repayment will change later.

## 4. Fund Your Renovation With a Cash-Out Refinance

With a [cash-out refinance](<https://lbcmortgage.com/cash-out-refinance/>), your existing home mortgage loan is replaced by a new, larger mortgage. After the old loan is paid off, the difference is available as cash. This cash can be used for purposes such as home renovation projects.

A cash-out refinance is a convenient option when a borrower wants renovation funds while also changing the terms of their current mortgage. But refinancing the entire mortgage solely to obtain renovation money is not automatically the best choice.

We recommend you compare your current interest rate with the rate on the new mortgage, consider closing costs, and look at how the new balance and loan term affect the total amount you may pay over time. If your existing mortgage already has favorable terms, you may consider a second-mortgage option.

## 5. Explore Personal Loans and Credit Cards

Personal loans and credit cards can provide easy access to funds without borrowing against your home. For a smaller home renovation project, that convenience may be useful.

However, unsecured borrowing can carry higher interest rates than financing backed by home equity. Credit cards can become particularly expensive when large renovation balances remain unpaid for a long period.

Before using either option, borrowers should compare the total borrowing cost rather than focusing only on how quickly you can access the money.

## LBC Mortgage Helps You Choose the Renovation Financing

Renovating your home should start with a plan. Estimate the full cost, add room for unexpected expenses, and determine whether you need the money all at once or gradually. Then compare the interest rate, monthly payment, closing costs, repayment period, and total cost of each financing option.

At our company, we help homeowners and buyers compare different financing solutions based on their renovation goals, available equity, current mortgage, and overall financial situation. Turn to us, and our mortgage professionals will explain how each financing option works and help you evaluate the trade-offs. Contact [LBC Mortgage](<https://lbcmortgage.com/>) to discuss which financing approach may fit your renovation plans.

Make your next move 

### What could your mortgage look like?

Turn your plans into a conversation. Explore loan options with guidance from LBC Mortgage.

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**Author:** [Alex Shekhtman CEO & Founder, LBC Mortgage](<https://lbcmortgage.com/team/alex-shekhtman/>)

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## Frequently Asked Questions

- ### 1. What is the best way to finance a home renovation?
**

There is no one-size-fits-all solution. The right option depends on the cost of your renovation project, your available home equity, your current mortgage, and how you want to receive and repay the money.

If you’re a homeowner who has accumulated home equity, you might want to consider a home equity loan (HELOC). A home equity loan provides you with a fixed amount of money, which is suitable for those who know how much they will spend on the renovation project. Meanwhile, a HELOC works as a credit line, allowing you to access funds as renovation expenses arise.

You can use a cash-out refinance, where you replace your existing mortgage with a newer loan and receive part of your available equity in cash. However, in this case, comparing the old and new loans is a must due to the refinancing process. Compare the new interest rate, closing costs, monthly payment, and loan term with your existing mortgage.

For smaller home renovation projects, using savings or a personal loan may be simpler. Before making a final decision, compare the total cost of borrowing rather than focusing only on the amount of money available. You can also explore our [home renovation financing guide](<https://lbcmortgage.com/blog/transforming-your-space/>) to learn more about the available options.
- ### 2. How much can I borrow to renovate my home?
**

The amount you can borrow for a home renovation depends on the financing option you select, your financial profile, and, for equity-based financing, the value of your home and the home equity you have available.

If you have applied for a home equity loan or HELOC, the lender will take into account the current value of your home, the amount you still owe on your mortgage, and the maximum loan-to-value or combined loan-to-value ratio allowed by the particular program.

Thus, having $100,000 in home equity does not necessarily mean you will be able to borrow the entire $100,000.

Your credit history, salary, existing debts, and your ability to pay the new monthly mortgage payment will also affect the amount of financing you can qualify for. If you opt for a cash-out refinance, the amount of equity that must be left in your house after refinancing and the requirements of the particular loan scheme will also be taken into account.

Renovation mortgages work somewhat differently because eligible improvement costs may be incorporated into the mortgage itself. However, specific loan and renovation cost limits still apply and vary by mortgage program.

Before deciding how much to borrow, consider how much you actually need. We recommend creating a detailed renovation budget and leaving room for unexpected expenses.
- ### 3. Can I finance renovations when buying a home that needs repairs?
**

Yes. Certain home renovation mortgage programs allow eligible borrowers to finance both the purchase of a home and qualifying renovation costs through the same mortgage.

This can be useful when you find a property with an ideal location, size, and layout but some renovations are needed to make it suitable for your needs. In this case, an eligible renovation mortgage may combine the home purchase and renovation costs instead of requiring separate financing for each.

One such financing option is the FHA 203(k) Rehabilitation Mortgage. This program is designed to finance the purchase or refinance and rehabilitation of an eligible property. Depending on the scope of work, borrowers may use a Standard or Limited 203(k), and the program has specific rules regarding eligible properties, home improvements, contractors, and the way renovation funds are handled.

Conventional renovation financing may also be available, including programs that treat eligible renovation costs as part of the overall mortgage. However, a renovation loan doesn’t simply mean extra money for the borrower at closing.

Depending on the particular mortgage program, renovation funds may be released as the work is completed, and documentation and/or inspections may be required. Before taking this step, you should have a realistic estimate of the renovation costs and timeline, and we recommend discussing the project with a mortgage professional.

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