Using Home Equity to Make Home Imrovements

How can a homeowner tap into their equity to fund home improvement projects?
kitchen renovation

Your home is not just a place to rest your head. It’s also a valuable asset that can grow in value over time. One way to boost its worth? Making home improvements. And guess what? You can tap into your home’s equity to fund those renovations. Let’s dive in and see how it all works.

What is Home Equity?

Think of home equity as the difference between what your house is worth and what you owe on your mortgage. It represents your financial ownership in your home. As you make regular mortgage payments, and as the value of your home rises, your equity grows. Additionally, home values in most areas of the United States have risen since 2020. There is a lot of untapped equity sitting there if you wish to use it.

Why Use Home Equity for Improvements?

  1. Value Boost: Making the right home improvements can increase your home’s market value. So, you’re essentially reinvesting in your property.
  2. Affordability: Home equity loans or lines of credit often come with lower interest rates than credit cards or personal loans.
  3. Tax Benefits: Depending on your situation, the interest on home equity loans might be tax-deductible.

How to Tap Into Your Home Equity

There are two main ways to use your home’s equity to pay for home improvements:

  1. Home Equity Loan: This is a second mortgage on your home. You borrow a lump sum and pay it back over a set term at a fixed interest rate.
  2. Home Equity Line of Credit (HELOC): This functions like a credit card. You have a credit limit and can borrow as much or as little as you need. The interest rate is usually variable, but considerably lower than a credit card. You will also need to pay it off.

You can find rates and lenders updated each day here >>

HELOCs are becoming more popular right now as ways to pay for home improvements. Some homeowners would rather finance a home renovation vs tapping into their cash or selling their stocks. A HELOC provides a significantly lower rate than credit cards, which might make it a great if you want to make payments over time vs a lump sum. If you use a credit card for home renovations, we highly recommend paying it off before accruing interest. This is why a HELOC might make more sense.

Smart Tips for Using Home Equity

  1. Plan Your Improvements Carefully: Not all renovations will give you a good return on investment. For example, a kitchen remodel might add more value than a luxury spa bathroom.
  2. Borrow Only What You Need: Just because you have equity doesn’t mean you should max it out. Borrow only what you need for your planned improvements.
  3. Understand the Terms: Whether you choose a home equity loan or a HELOC, be sure you understand the terms. Know your interest rate, repayment period, and any fees.
  4. Stay On Budget: Once you get the funds, stick to your renovation budget. It can be tempting to overspend, but remember you have to pay this money back.

A Word of Caution

While using home equity can be a smart way to fund improvements, there are risks. If you don’t repay the loan, you could lose your home. Always be sure you can handle the additional debt.


Your home is more than just walls and a roof. It’s a place of memories, a secure haven, and a financial asset. Using your home equity to make improvements can be a wise investment in your future. However, like all financial decisions, it requires careful consideration and planning.

Before diving in, consider the costs and benefits. And perhaps consult a financial advisor to ensure you’re making the best decision for your circumstances. With the right approach, you can enhance your living space and potentially boost the value of your biggest asset.



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