Navigating Home Equity Loans for Renovations

Most homeowners realize that in order to maintain and increase the value of your property, you not only need to maintain its current state but continue to make improvements along the way.  These same folks also realize that the house you bought may need some alterations to accommodate life changes, including increasing space, repurposing rooms or areas, or modifications for disabilities. 

If you are lucky, you have a safety net of cash or investments that you can allocate toward your home renovations.  For most of us, it will be necessary to take out a loan.  Your home is probably your greatest asset, so it makes sense to use it as collateral toward a home equity loan.  Most lenders view this as one of the best moves possible.  There are several types of ways to go.

Exploring Home Equity Options for Your Renovation Projects

There are several options if you are looking to leverage the equity you have built in your current home in order to complete your projects.  These include a home equity loan, refinancing your current mortgage, or a home equity line of credit (HELOC).  Each option has different requirements and restrictions.  To begin with, consider how much you will need, what it will cost in interest (and application costs), how much equity you have accumulated, and how difficult it may be to secure the loan.

Home equity loans are fixed amounts of money based on the amount of principal you have already repaid.  The interest rates are generally lower.  A HELOC is similar, but instead of a fixed amount of money, you get a revolving amount of credit that you can draw on, or not, and it is renewable as you pay off the HELOC.  This means you can borrow the money when you need it and only those amounts necessary.  Again, the amount available will depend on the equity you have already accumulated.

A Closer Look at Lower Interest Rates and Potential Pitfalls

Refinancing is getting a whole new mortgage.  The advantage here is that interest rates will be lower, and you will pay less for the property over time.  The interest can be less than you are paying currently because either the rates in the country have lowered or you have improved your credit score to qualify for a more favorable deal.  You need to be aware of the terms of your existing mortgage because you may be penalized for early payment.  You may also be charged fees for a new inspection and processing.  The refinancing limit is capped at 80% of your home’s value.

All of this may become confusing, and difficult to decide the best plan for you and your circumstances.  A good way to sort things out is to work with a company like  They deal with these issues on a daily basis and can help you sort through the options and your finances and help you with the best possible scenario.  They are also a good resource for lenders since they have access to a wide range of financial entities and help direct you to the best deal.