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. 

To start the process of funding your remodel with a home equity loan, reach out and start your application today! 

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.  

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. 

• Based on the equity in your home, you may be able to borrow a larger amount. 

• With fixed interest rates, you will have predictable monthly payments. 

• The interest paid on funds from a home equity loan used to update or upgrade your property could be tax-deductible*. 

Like all loans, there are some negatives of using a home equity loan for a remodel depending on a borrower’s financial situation and needs. These are a few of the reasons that give homeowners pause before using a home equity loan for a remodel. 

• Home equity loans can come with stricter requirements, such as credit score, debt-to-income (DTI) ratio and minimum equity. 

• You will have to pay any closing costs that come with finalizing your home equity loan. 

• If the housing market changes for the worse after borrowing, you can end up owing more than your home is worth. 

• The biggest concern for borrowers is that your home is used as collateral, so failing to make payments could lead to foreclosure. 

If you can’t meet the qualifications for a home equity loan or are looking for other options, here are few you could consider for your home renovation or remodeling projects. 

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 finance a number of expenses, including any home renovations or remodels. Choosing to use your cash-out refinance for any home updates you are planning to make could increase your home’s value. 

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. 

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.  

You can apply for a home equity loan online with a lender. To prepare for your application, you can gather some of the required information ahead of time. 

When you apply, most lenders will ask you to provide your credit score, DTI ratio, current home appraisal and minimum home equity between 15% and 20%. Lenders tend to want borrowers to have a credit score of at least 620 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! 

_{*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.} 

_{Applicant subject to credit and underwriting approval. Restrictions apply.} 

_{Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate, Inc.  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.}