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What You Need to Know About Using Your Home Equity For Remodeling

What You Need to Know About Using Your Home Equity For Remodeling

Home ยป What You Need to Know About Using Your Home Equity For Remodeling

One great thing about owning a home is the ability to withdraw some of your equity to do work around the house. This article explains what you need to know about using your home equity for remodeling.

How Do You Use Equity for Home Renovations?

The first step in the process is applying for a loan. You have two options here.

  1. You can get a home equity loan, or
  2. You can get a home equity line of credit (HELOC)

If you get the loan, you will need to pay interest on the loan. The good news is that these loans are relatively low interest right now, but that may change in the next few years as the Fed tries to keep inflation to a minimum. We’d rather not quote any rate here, since things are very dynamic right now. So instead, the best way to get today’s current rates is to reach out to us.

How to Qualify for Tax Deductions

They say that the only two guarantees in life are death…and taxes. Fortunately, there are things you can do to lower how much you owe for taxes. One vehicle is using a home equity loan or HELOC to do renovations around your home. The key is that last part. If you take out home equity, you must use that money to improve your home. You can’t use it to pay off your credit cards, take a vacation, or pay your bills. Instead, it needs to go towards significant renovations on the home. Moreover, you can’t take advantage of the tax deduction if you don’t use it for renovations.

Pros of Using a Home Equity Loan or HELOC

There are a few advantages to using this financing method to fix your home. First off, the interest rates are relatively low right now. And they’re much lower than if you got a personal loan. Second, you can use the tax deduction. Third, you are fixing up the home! Whether you plan on staying in it forever or you want to sell in the next year, it doesn’t matter. Fixing up your home makes it more enjoyable in the short term and sellable.

Cons of Using a HELOC or Home Equity Loan

There are a few downsides to consider. First is the risk. If you fall behind on payments, your home can be foreclosed upon. So yes – just like with a mortgage, you need to stay up to date on your payments. Second, your loan can be closed if your home’s value dramatically depreciates. In today’s market, this can happen, so it’s something to be aware of. Third, the amount of money you’d take out as part of a home equity loan may be more than you need. If you only need a few thousand dollars worth of repairs, saving up the money on your own might make sense instead of taking out a loan. Finally, the cost of the loan is more than just the interest you pay. You also have to pay fees like original fees and appraisal fees.


Using your home equity to pay for remodeling is a great way to finance the work, but it’s not for everyone. If you have any questions or would like help comparing loan options, our team at the RCG Home Loans would be happy to assist you. Contact us today to get started! We’ll help you evaluate your options so you can choose the best one for you.

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