Can I use a home equity loan for remodeling?
Yes, you can use a home equity loan for remodeling your home.
From remodeling or renovating your home to consolidating debt or paying for school, home equity loans can be used for almost any need a borrower may have. One of the most common ways borrowers choose to fund their remodels is through a home equity loan.
How does a home equity loan help with my remodel?
A home equity loan can help fund most if not all home remodels you may need or want. When you choose a home equity loan, you will make monthly payments on both the loan amount and interest.
Using a home equity loan for your remodel reinvests your home’s value, which could potentially raise the home’s overall value. This means that using a home equity loan for a remodel could be a great return on investment.
What are the benefits of using a home equity loan for my remodel?
There are many benefits to using your home equity for a remodeling project. Here are some reasons homeowners decide to fund their remodels with a home equity loan.
Home equity loans tend to have longer terms and lower interest rates through a Home Equity Line of Credit (HELOC)1 and closed-end second mortgage.
Based on the equity in your home, you may be able to borrow a larger amount.
Variable and fixed-rate options available, fixed-rate options come with predictable monthly payments.
The interest paid on funds from a home equity loan used to update or upgrade your property could be tax-deductible3.
While both options allow you to tap into your home's value without touching your primary mortgage, they function very differently "under the hood." Choosing the right one depends on how you plan to use the funds for your remodel.
The Closed-End Second (Home Equity Loan)
Think of this as a lump-sum advance. When you close on a closed-end second mortgage, you receive the total amount of your equity in one bank deposit.
- How it works: You have a fixed interest rate and a set monthly payment that never changes.
- Best for: Large, one-time remodeling projects with a defined contract price (like a $100k kitchen remodel)
The HELOC (Home Equity Line of Credit)
Think of this as a revolving safety net. It works similarly to a credit card where you are given a maximum limit, but you only borrow what you need, when you need it.
- How it works: You usually have a "draw period" (where you can spend) followed by a "repayment period." While many HELOCs have variable rates, Rate offers both variable4 and fixed-rate1 HELOC options to fit within your financial budget.
- Best for: Ongoing projects done in phases, emergency repairs or for homeowners who want a "just in case" fund.
Are there other loan options for a remodeling project?
If you can’t meet the qualifications for a home equity loan or are looking for other options, here are a few you could consider for your home renovation or remodeling projects.
Cash-out refinance5
A cash-out refinance is another way you could tap into your home’s equity. If the value of your home has increased since you purchased your home, you can get a new mortgage for a larger amount with the difference returned to you as a lump-sum amount.
The amount you receive from a cash-out refinance can be used to fund a number of expenses, including any home renovations or remodels. Choosing to use your cash-out refinance for home updates could increase your home's value.
Personal loans6
If you don’t want to use your home’s equity or put up collateral for a remodel, many personal loans are unsecured, so you don’t need collateral to qualify. Typical personal loan amounts can be up to $50,000. After you are approved for your personal loan amount, you will make monthly payments on the approved amount and interest.
Credit cards
Using your credit card to fund any of your desired home remodels can come with the benefits you receive from your card. These benefits can include cash back, welcome bonuses for new cards or the flexibility to choose the rewards that your card offers.
How can I apply for a home equity loan?
You could apply for a home equity loan online with a lender. To prepare for your application, you could gather some of the required information ahead of time.
When you apply, most lenders will ask you to provide your credit score7, DTI (debt-to-income) ratio, current home appraisal and minimum home equity between 15% and 20%. Lenders tend to want borrowers to meet minimum FICO score required and a DTI ratio of 43% or lower. But the higher your credit score or lower your DTI ratio, the better your home equity loan terms could be.
Apply now to start a home equity loan application with a trusted lender!
1 Rate’s home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions Apply.
2 Available as closed end, fixed rate, second lien. Eligibility for second home and investment properties allows for only 10 total financed properties. The total of first and second liens cannot exceed $3M. No more than two mortgage liens are permitted on a single property. Financing subordinate to the new second lien is not permitted. First lien mortgages must be fully amortizing, fixed rate or adjustable rate mortgage loans only. Minimum down payment and FICO score requirements apply and impact total loan amount available from $50,000 to $500,000. Maximum debt to income cannot exceed 50%. State and product restrictions vary so talk to your loan officer about what options may be available to you. Not available in all states. Additional restrictions apply. Not all applicants will be approved. Applicant subject to credit and underwriting approval. Not a commitment to lend. Contact Rate for more information.
3 Rate does not provide tax advice. The consumer should always consult a tax advisor for information regarding the deductibility of interest and other charges in their particular situation.
4 Rate home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions apply.
5 Using funds from a Cash-out Refinance to consolidate debt may result in the debt taking longer to pay off as it will be combined with borrower’s mortgage principle amount and will be paid off over the full loan term. Contact Rate for more information.
Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.
6 Loans are made by Guaranteed Rate, Inc. (NMLS ID 2611).
Standard fixed rates from 9.99% to 21.99% APR. With a 0.25% autopay discount established at loan origination with an automated monthly debit from a qualifying deposit account for repayment, fixed rates range from 9.74% to 21.74% APR. Loan amounts range from $4,000 - $50,000 and are subject to state requirements. Loan proceeds cannot be used for post-secondary education expenses or to purchase cryptocurrency or securities.
Terms and Conditions: You must be 18 years of age or older (19 years of age or older in Alabama). To qualify, a borrower must be a US citizen, a permanent resident, or a non-permanent resident in the US on a valid, long-term visa. All loan applications are subject to credit review and approval as well as income and employment verification. You must meet our minimum requirements established for this offer including, but not limited to, credit history, debt-to-income ratio, and application information. Your actual rate depends on your requested loan amount, loan term, creditworthiness, and a variety of other factors. Loan amounts range from $4,000 - $50,000. Rates and loan amount may differ due to state-specific requirements and may impact your ability to qualify for a loan. Limitations: AK, AR, FL, KS, MA, NC, PA, RI, TX, IL, MA, NH, NM and WY (rate). The lowest rate advertised is reserved for the most creditworthy borrowers. Advertised rates and terms are current as of 02/21/25 and are subject to change without notice.
An origination fee of 0%-6.5% is charged for each loan, which will be deducted from any loan proceeds you receive, and are subject to state requirements. Restrictions apply, please refer to http://rate.com/personal-loans for more information.
Personal loans are only available in AK, AL, AR, AZ, DC, DE, FL, GA, IA, IL, IN, KS, KY, MA, MD, MI, MO, MT, ND, NC, NH, NJ, NM, OH, OK, PA, RI, SC, SD, TN, TX, UT, VT, WA, WY and as of 1/14/26. Loan applications outside of these states will not be accepted at this time.
7 Rate does not provide free credit reports, credit counseling, or credit repair services. You are entitled to a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at AnnualCreditReport.com - the only authorized source for free credit reports under federal law. For more information about obtaining your credit reports, visit the Consumer Financial Protection Bureau at www.consumerfinance.gov or call 1-877-322-8228.
