How to Pay For Home Renovations

When thinking about how to pay for a home renovation, it’s essential to shift the conversation from “How much will this cost?” to “What value will this bring to my life?” Sardone | McLain believes remodeling is more than a financial transaction. It’s a partnership built on trust, where you’re not just investing in a finished product, but a dream home for the foreseeable future. Deciding how to fund your project should feel safe, secure, and right for you, and you may have more options and factors to consider than you think.  

By taking a long-term view and considering your family’s immediate needs, you can confidently decide whether this is the right time to invest in your home. Sardone | McLain is here to guide you through every step of the process, helping you balance your financial goals with your vision for your ideal living space.

A Survey of the Current Financial Landscape for Remodeling

The remodeling market is dynamic, and costs have shifted significantly in recent years due to inflation, supply chain issues, and increasing demand. While the financial environment may feel challenging, it’s important to remember that interest rates, much like home values, are not static. Today’s rates won’t last forever, and refinancing opportunities will likely arise in the future, making now an excellent time to move forward with your project.

Another key consideration? The cost of waiting. Renovation expenses are unlikely to decrease over time. Starting your remodel today means you’ll lock in current costs and enjoy the benefits of your updated home sooner. Think of it this way: every day you wait is a day you miss out on the improved quality of life your dream renovation will provide.

The Smart Way to Choose Financing

Think Beyond the Numbers

Paying for home improvements isn’t just about finding the lowest rate. It’s about aligning your financial strategy with your life goals. Ask yourself:

• How long do I plan to stay in this home?
• Will this renovation improve my daily quality of life?
• What’s the emotional ROI of completing this project now?

Long-Term Goals Matter

For families who love their neighborhood but need more space or updates, renovating often makes more sense than relocating. Even in a high-rate environment, the cost of moving, such as agent fees, closing costs, and potential higher home prices, can far exceed the cost of remodeling.

Financing Options for Home Renovations

Finding the right financing option to fund your Dallas renovation is about aligning your needs, goals, and financial circumstances with the project you’re planning. 

Home Equity Loan or HELOC (Home Equity Line of Credit)

How a HELOC Works

• A home equity loan is a lump-sum loan based on the equity you’ve built in your home.
• A HELOC works like a credit card, providing a revolving line of credit that you can draw from as needed.

Why It’s Great

• Both options typically offer lower interest rates than personal loans or credit cards.
• They’re especially useful for large-scale projects like remodeling, primary suite additions, or whole-home renovations.

Considerations

• In Texas, laws require homeowners to retain at least 20% equity in their property, limiting the amount they can borrow.
• Interest rates may vary for HELOCs, so planning your repayment is key.

Credit Cards for Small Renovations

Can I Use Credit Cards for Renovations?

• Use a credit card to fund smaller, cosmetic upgrades like repainting, light fixtures, or adding new appliances.

Why It’s Great

• Convenient and quick to access funds.
• Ideal for minor projects under $10,000.

Considerations

• High-interest rates can make this option expensive if you cannot pay off the balance quickly.
• Not usually suitable for structural or large-scale renovations.

Cash-Out Refinance

What is Cash-Out Refinancing?

• Replace your existing mortgage with a new one for a higher amount, taking the difference as cash to fund your renovation.

Why It’s Great

• Allows you to fund significant projects like a second-story addition or a major kitchen overhaul.
• Simplifies your debt by combining your mortgage and renovation financing into one payment.

Considerations

• You’ll likely have a higher interest rate compared to your original mortgage, at least for now.
• Best for homeowners who plan to stay in their homes long enough to offset the refinancing costs.

Renovation Mortgages

How Do Renovation Mortgages Work?

• Borrow against your home’s future appraised value, which includes the value of the planned improvements.

Why It’s Great

• Perfect for larger renovations that increase your home’s market value.
• Allows you to finance up to 100% of your project’s cost.

Considerations

• Requires detailed project plans and estimates upfront.
• The approval process can take longer than other financing options.

Home Improvement Loans

What Are Home Improvement Loans?

• Personal loans designed specifically for renovation projects, often unsecured.

Why It’s Great

• No need to use your home as collateral.
• Quick approval process, making it a good option for smaller or medium-sized projects.

Considerations

• Higher interest rates compared to secured loans.
• Loan amounts may be capped, limiting its use for major renovations.

Which Financing Option is Best for You?

The right financing option depends on your own personal calculus.

• The Scope of Your Project: A small bathroom update may be ideal for a credit card or personal loan, while a whole-home renovation may call for a HELOC or renovation mortgage.
• Your Financial Goals: Do you want the lowest possible interest rate? Minimal upfront costs? A quick payoff period?
• Your Current Home Equity: Homeowners with significant equity may find HELOCs or cash-out refinancing the most appealing.

Factors That Impact Financing Decisions

Financing a home renovation is not a one-size-fits-all process. The right choice for you depends on several key factors influencing how much you can borrow, what it will cost, and how you’ll pay it back.

Credit Score

Your credit score plays a significant role in determining your financing options and interest rates.

• Higher Scores: Unlock access to lower interest rates and more favorable terms.
• Improving Your Score: Before applying for a loan, ensure your credit report is accurate and pay down existing debts to boost your score.

Loan Amount and Project Scale

The size of your renovation impacts which financing options are feasible:

• Smaller Projects (under $10,000): Credit cards or personal loans may suffice.
• Mid-Range Renovations ($50,000–$200,000): HELOCs or home equity loans often work best.
• Large-Scale Projects ($200,000+): Renovation mortgages or cash-out refinancing allow you to leverage future value or significant equity.

Home Equity and Value

Your home’s current and future value directly affect your borrowing limits.

• Current Value: Determines eligibility for home equity loans or HELOCs.
• Future Value: Essential for renovation mortgages, which consider the increased value of your home post-renovation.

Emotional ROI

Remember, the value of a remodel isn’t just financial. A beautifully designed space can improve your daily life, making every penny you spend worth it. Investing in your home means investing in your happiness, comfort, and future.

Your Partner for Design-Build Remodeling in Dallas

Paying for a home renovation doesn’t have to be stressful. With the right plan, the right team, and the right financing, you can create a home that’s tailored to your life, your family, and your future. Sardone | McLain is here to help you turn your vision into reality with expert guidance, award-winning craftsmanship, and a client-first approach.

Ready to take the next step? Let’s discuss your vision and goals and how we can bring them all together. Contact Sardone | McLain today to start building a home you’ll love for years to come.