how to finance a home remodel

Here’s what you need to know about your options for sprucing up your home

Remodeling your home can improve your life in two big ways: First, it makes your living space more comfortable, whether you're thinking of updating your kitchen, adding a bedroom, or building a whole new floor. Second, it usually raises the value of your home, which helps you increase your equity and get top dollar when it’s time to sell.

But the variety of options when it comes to financing a remodel can be overwhelming. Here’s an overview of the financial tools you can use to get the job done.

Mortgage refinance

If the interest rate on your mortgage is higher than current market rates, you may be able to refinance it at a lower rate. Doing so could both lower your monthly payments and free up cash to remodel. A cash-out refinance replaces your mortgage with a home loan for more than you currently owe. You get the difference in cash, which can then go toward home improvements. Note that you may pay a higher interest rate in exchange for the higher loan amount.

Home equity loan

A home equity loan is sometimes called a second mortgage. It allows you to borrow against the equity you've built up through homeownership. You get the loan in a lump sum and pay it back in monthly payments at a rate that's usually a little higher than the rate for conventional mortgages. One perk: payments on home equity loans are usually tax-deductible.¹

Construction loan

Depending on the size of your remodel, a construction loan could be an option. A construction loan allows you to finance larger projects with flexible disbursements and even allows you to choose your own builder. 

Personal loan

You don't have to use your house as collateral for a remodel. Sometimes a personal loan—using your savings account, investments, or retirement account as collateral—can supply you with the funds you need. Your interest payments won't be tax-deductible, but going this route might secure you a lower rate than other options.

The best way to pay for home renovations depends on your specific situation. To find the option that works for you, make an appointment to talk to a mortgage loan officer at First Financial today.

1 Consult a tax advisor.

All loans subject to credit review and approval.

The information on this page is accurate as of January 2021 and is subject to change. First Financial Bank is not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving bankatfirst.com. First Financial Bank is not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender.