Financing Home Improvements: Increase Value & Explore Your Options

Home renovations that offer a high return on investment can make your house more enjoyable to live in, and they are often a smart money move when it’s time to sell. If you have a few upgrade ideas but you’re worried about how to pay for it all, don’t fret — you’ve got options.

From home equity products to personal loans, there are several ways homeowners can go about financing home improvement projects. To ease your money anxiety, we’ve compiled a list of different financing options. Plus, we put together a rundown of home improvement projects that offer the highest return in case you’re wondering which home projects to prioritize.

In this article

• Financing home improvement projects: What are your options?
• A word of caution on borrowing from your 401(k)
• 5 home improvement projects with the highest return on investment
• FAQs
• The bottom line

Financing home improvement projects: What are your options?

If you have enough equity in your home, you may be able to borrow from that equity to pay for home projects. Homeowners without equity might consider turning to other options like credit cards or personal loans. Here are a few ways to finance your next home improvement project:

Home equity line of credit (HELOC)

Home equity lines of credit are revolving credit lines that let you borrow against your home’s equity. You get a credit limit that you can use and pay back as needed. Lenders look at factors such as your credit score, home equity, and debt-to-income ratio when deciding whether to approve you for a HELOC.

You will likely have the best shot at getting approved with a credit score greater than 700, and you may need at least 15% to 20% equity in your home with a debt-to-income ratio below 43% to qualify.