Financing Large Renovation Projects

Few homeowners have $100,000 in cash sitting in a checking account for an addition. Fortunately, there are several ways to leverage your home's equity to fund construction.

HELOC (Home Equity Line of Credit)

A HELOC works like a credit card. You are approved for a certain amount based on your equity, and you only pay interest on what you draw. This is ideal for renovations where costs are paid in stages (milestones).

Cash-Out Refinancing

This replaces your existing mortgage with a new, larger one, and you pocket the difference in cash. This is a good option if you can get a lower interest rate than your current mortgage, but closing costs can be high.

Construction Loans

For massive projects (like tearing off a roof to add a second story), a construction loan pays the contractor directly as work is completed. Once the project is done, the loan converts to a standard mortgage. These require detailed plans and fixed bids from your contractor.