Whether you want to replace an aging roof, add insulation before cooler weather or finally redo the kitchen, the first question is usually the same: how will you pay for it? If savings will not cover the whole project, borrowing against your home can be an affordable option. Three approaches come up most often, and each one fits a different situation.
Before choosing financing, get clear on what you are actually doing. Walk through the house or hire an inspector to flag issues, then rank projects by urgency. Safety and structural repairs come first, followed by updates that save money, like energy-efficient windows or HVAC upgrades, and then the purely cosmetic projects. Get written estimates from licensed contractors, add a cushion for surprises and confirm which permits you need.
A HELOC is a revolving line of credit secured by your home’s equity. You draw money as you need it, which works well for projects paid in stages or ongoing improvements. Your first mortgage stays in place, so this can be attractive if you are happy with your current loan. Rates on HELOCs are often variable, so payments can change. Learn more about our HELOC option.
A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. You end up with one loan and one payment, often with a fixed rate. It tends to make the most sense when you have substantial equity and the new loan terms work for your budget. Our refinance page explains the details.
A 203(k) loan bundles the cost of a home and its repairs into a single mortgage. It is mostly used by buyers purchasing a fixer-upper, though it can also be used to refinance. Because the work is built into the loan, there are rules about contractors, inspections and how funds are released. See our FHA 203(k) page for more.
Whichever route you take, borrow only what you need and remember that the loan is secured by your home. Projects that protect the house or improve its comfort and value are generally the best use of home equity.
Not sure which option fits your project? A FLO Mortgage loan officer can compare them side by side for you. Reach out to our team to talk it through.
A FLO Mortgage loan officer can walk through your options, run real numbers and help you choose a loan that fits.
This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.
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