Renovation financing, the three options that actually exist

Three honest paths exist for financing a renovation through your mortgage, and the right one depends on whether you already own the home, how much you need, and how you'd react to a 12-month delay. I walk every client through all three before we pick. The wrong choice on a renovation refinance can lock you into a higher rate or a higher penalty than you needed.

Option 1: Purchase Plus Improvements

Buying a home that needs work? You can roll the renovation budget into your mortgage at purchase — meaning you finance the home AND the renovations in one shot, at mortgage rates, with as little as 5% down on the total.

How it works:

1. Get quotes for the specific renovations you plan to do
2. We submit the purchase with quotes attached; lender approves based on the post-renovation value
3. You close, move in, and do the work within a set timeframe (usually 90-120 days)
4. Once renovations are complete and inspected, the renovation funds are released to you

Option 2: Refinance for Renovation

Already own your home? Refinance up to 80% of the current value, pull out cash for the renovation, and fold the new, larger mortgage back into a single payment.

When this wins:

• Large renovation budgets ($50,000+)
• You want a predictable monthly payment rather than a variable line of credit
• Rates are favorable and a refinance will also improve your interest rate

Option 3: HELOC (Home Equity Line of Credit)

A HELOC is a revolving credit line secured by your home. You get approved for a limit, and you draw on it as needed — paying interest only on what you use.

When this wins:

• You're doing the work in phases and only need money at certain points
• You want flexibility to draw or pay down repeatedly
• The renovation budget is uncertain or may change

HELOCs typically run at prime + 0.5% (higher than a mortgage but lower than any unsecured credit), with interest-only minimum payments.

Which option fits your project?

Frequently Asked Questions

Plan the financing before you start the project

The biggest renovation mistakes I see come from people who signed the contractor first and asked about financing later. Bring me your quotes before you sign anything — we'll structure the financing in the way that saves you the most money over the life of the loan, not just the first month.