How to Pay for Home Renovations: 4 Options to Fit Your Needs

Feb 14, 2023

Planning a Home Renovation?
Here are the pros and Cons of your home improvement Financing Options.

Homeowners are making it clear: when the housing market is challenging, they’d rather remodel than buy a new home.

According to the Harvard Joint Center for Housing Studies, home improvement spending grew a whopping 43% from $328 billion in 2019 to $472 billion in 2022, fueled by lifestyle changes, high mortgage interest rates, and rising home prices – all of which are factors in remodel-or-move decision-making. Not surprisingly, two-thirds (66%) of respondents to Improveit’s “Should I Remodel or Move?” quiz reported that their mortgage rate would increase if they bought a new house, and nearly the same number (64%) said home prices are increasing in their area of the country.

How to Pay for Home Renovations

how to pay for home renovations

But even if moving is cost-prohibitive, remodeling remains a major investment that can leave homeowners wondering how to pay for home renovations.

Since everyone’s financial situation is different, we’ve compiled a pros-and-cons list of the most frequently used financing options we see at Improveit. Take a look at the list below to see which option makes the most sense for you and your family.

1. Save Up, Then Spend: Paying cash for Home Improvements

Pros: Avoiding interest and fees is the most advantageous aspect of paying cash for home improvements. By setting aside money on a regular basis, you can save up for your project a little at a time without taking a large chunk out of your regular budget.

Cons: This method of payment can take a while depending on how much money you’re able to sock away each month. Since remodeling costs can increase from year to year, you may end up paying more for the same materials by using this method.

planning a home renovation

2. FinancE Your Project: Use Your Remodeler's Promotional Rates

Pros: Financing allows you to spread out the cost of your project into manageable monthly payments that fit your budget. Many remodelers work closely with lenders to offer a variety of financing options with attractive details like low or no interest and payments for a certain amount of time. 

Depending on your financial situation, working with a lender through your remodeler will often result in a better interest rate than if you paid with a regular credit card.

Cons: Unlike paying with cash, financing your remodel will likely include interest to pay at some point during the life of the loan.

Qualifying for project financing is easy and can usually be done at your kitchen table with your remodeler, but may affect your credit score depending on how the lender pulls your credit report.

Jerry & Patty T
Lancaster, OH
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“Everyone at Improveit, from the sales representative to the installers and even the owner of the company were professional, patient, polite and easy to deal with. The sales rep carefully explained and demonstrated the superior quality and value of their windows along with their comprehensive lifetime warranty. Improveit provided affordable and flexible financing through their affiliate. The installers did an excellent job, even modifying the trim around the windows to fit better than it did originally. We would highly recommend Improveit to anyone looking for superior quality windows at an affordable price.”
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Ft. Mitchell, KY
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“They did a complete removal and replacement of our tub and shower. Everybody we have worked with has been responsive to all our questions and the products look great! Love that it has a lifetime warranty and we were able to take advantage of financing to make the project easier to afford.”
Diane V.
Cincinnati, OH
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“This company goes the extra mile. Installers show up on time and are very competent in their skills. Also, clean-up was impeccable. They were very respectful of my home and me as a homeowner. They were conscientious of not letting our pets out. They even arrange financing. We love the finished products. I would definitely recommend this company to family and friends!”
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3. Let Your Home Pay for Itself: Use Your Home Equity

Pros: Home equity loans and home equity lines of credit (HELOC) are two vehicles that let you leverage your home’s value to pay for other expenses like home improvements. As home values have risen in recent years, many homeowners now have more equity than ever, potentially increasing the amount you can borrow. 

HELOCs and home equity loans usually have lower interest rates than other loan types, as well as long repayment timelines, both of which help you easily fit the cost of a remodel into your budget.

Learn more about the differences between HELOCs and home equity loans here on our blog.

Cons: Most importantly, HELOCs and home equity loans can put your home in jeopardy if you don’t pay as agreed. With your home as collateral, defaulting on these loans means the bank could put your home into foreclosure to recoup what you owe them. 

Lenders will pull credit reports as part of the lending process for these loans, and you may not be allowed to use the full amount of your available equity. Most banks will allow you to borrow up to 85% of your equity, so take this into account when calculating the cost of your home improvements vs. the amount you’ll be able to borrow.

home improvement financing options

4. Charge It: Pay for Home Improvements with a Credit Card

how to pay for home improvements without equity

Pros: As with other financed payments, putting your home improvement project on a credit card allows you to pay a little bit toward the balance each month, spreading out the payments so they fit comfortably in your budget. If you use credit cards that allow you to collect points, a remodeling project can help you build up your points balance to be redeemed later.

Cons: Investments like home improvements can require plenty of available credit and high credit limits. Using up all of your available credit for a large purchase can increase your credit score and leaves less credit available should you need your card in an emergency. Additionally, credit card interest rates are usually much higher than those for other available financing offers. Forbes says the average credit card interest rate is 23.56% as of early 2023.

Still wondering how to pay for home renovations?

The Improveit team has great relationships with several lenders and can help you understand all your financing options, including approximate monthly payments for the project you’re considering. Learn more on our Financing page, or schedule an appointment today! 

When you’re ready to start your project, our design consultants can get your financing approved right at the kitchen table and you’ll be on your way to an affordable, beautiful home improvement.

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