How to Finance Your Next Home Renovation

How to Finance Your Next Home Renovation

This past year many homeowners spent a lot more time at home. If you’ve been thinking about remodeling your kitchen, building out a home office, or doing a home renovation to update needed repairs, you’re not alone.

The good news is there are great renovation home loan programs that can help you finance your next big project.

A home renovation loan can help you roll the costs of home improvements into one mortgage and keep your monthly payment down. Save your cash reserves and check out the loans below.  If you’re thinking about a home renovation, doing some upgrades or even buying a fixer-upper, this article can help.

Top Home Renovation Finance Options

1. Fannie Mae HomeStyle Renovation Loan

The Fannie Mae HomeStyle Renovation is a conventional home loan designed for homeowners who want to make some repairs and renovations, without having a second mortgage. This a great option when you’re ready to make some big upgrades on your existing home and you don’t want to deplete your cash. For a HomeStyle Renovation Loan, a licensed contractor is required to supply a cost estimate along with a detailed scope of the project. The loan amount for repairs and renovations goes into an escrow account so that the contractors get paid directly. A HomeStyle Renovation Loan allows homeowners to refinance their mortgage and roll the costs of repairs and upgrades directly into one home loan.


  • Refinance your existing mortgage to include the cost of all repairs & renovations
  • Contractors get paid directly from an escrow account
  • One mortgage payment covers everything

2. FHA 203(k) Home Loan

The Federal Housing Administration 203(k) Loan is a good option when you want to refinance a home that needs some work or a little TLC.  With an FHA 203(k) loan you can combine the cost of renovations and repairs into one refinanced mortgage. Your new mortgage will cover the purchase or refinance plus the cost of all upgrades and renovations. You can then pay for your home renovations over time as you pay down your mortgage. The FHA 203(k) home loan is limited to your primary residence and can’t be used for luxury renovations.


  • The FHA 203(k) is a government-backed mortgage
  • The qualifications are less strict than conventional loan programs
  • Borrowers can often qualify with credit scores below 600

3. VA Renovation Home Loan

The VA Renovation Home Loan is a government loan program backed by the U.S. Department of Veteran Affairs. This loan program is a unique benefit offered to veterans, active service members and their spouses. As with other home renovation loans, the VA renovation loan rolls the cost of all upgrades and repairs into one mortgage.  In order for the loan to be approved,  borrowers are required to use a VA-approved contractor


4. Home Equity Loan

A home equity loan can be a great option if you already have equity built up in your home and you don’t want to refinance your first mortgage.  With a home equity loan, you’ll apply for a short-term loan often up to ten years. After the loan funds, you’ll receive a lump-sum for the amount you’ve decided to borrow. You’ll have a fixed monthly payment and you can start your renovations anytime you decide.


  • Receive the full loan amount available up front to get your remodel underway
  • Freedom to use your funds however and whenever you’d like
  • Fixed loan payment for a life of your home equity loan

5. Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is similar to a revolving credit account. The amount of the credit line will be based on your home equity and other loan approval factors. The interest rate for a line of credit is adjustable based on market rates and is available to you as long as the account is in good standing.


  • Access the funds at any time and for any purpose
  • Payments aren’t required until you draw funds from the credit line
  • Interest doesn’t accrue until you draw funds from the credit line
  • You can choose how quickly or slowly to pay it off

What’s Next

Working with an experienced mortgage broker can really help when you’re looking at different financing options for a home renovation. If you’re thinking about refinancing, starting a home renovation project or even shopping for a fixer-upper, give us a call. We can help.