America is on a remodeling binge, spending more than a billion dollars a day to upgrade and improve bathrooms, kitchens, floors, doors, windows, and just about everything else in the modern household. Everything from a coat of paint to complex renovations with architects and contractors is possible, depending on your budget and preferences.
How do you get the most for your renovation dollars? In large measure, the answer depends on why you want to renovate as much as what you want to improve.
$485 Billion for Home Improvements
According to the Harvard Joint Center for Housing Studies, annual spending on home repairs and improvements runs at roughly $485 billion. Higher interest rates and a slowdown in home sales could temper that pace — but energy-efficiency retrofits are expected to pick up the slack, especially as federal incentives remain attractive.
A home is more than shelter. It reflects our economics, status, and personal tastes. Naturally, people renovate for very different reasons — and those reasons can greatly influence their financial choices.
Common motivations include:
- Replacing aging or worn-out systems and finishes
- Improving energy efficiency to reduce long-term costs (new windows, solar installations, etc.)
- Updating a home’s style or design
- Increasing resale value ahead of a sale
Each year, Zonda Media publishes a Cost vs. Value study measuring the return on investment (ROI) for various projects. In recent years, homeowners saw strong returns on HVAC electric conversions (104% ROI), garage door replacements (103%), and manufactured stone veneer (102%). On the other end of the spectrum, upscale primary suite additions (22% ROI) and upscale bathroom additions (26.6%) are typically done for personal enjoyment rather than financial return.
How To Finance Home Improvements
Home repairs and renovations cost money — and that raises the practical question of how to pay for them. While big-ticket projects get a lot of attention, many upgrades involve modest costs and accessible financing options.
Before exploring financing, it helps to ask yourself a few questions:
- What needs to happen first? Prioritizing projects lets you spread costs over time and potentially pay out of pocket.
- How much can you DIY? Doing some work yourself can significantly reduce labor costs. That said, gas lines, electrical work, and other skilled trades should always be handled by licensed, insured professionals.
- What can you preserve? A full gut renovation isn’t always necessary. Keeping parts of an existing bathroom or kitchen can speed up the project and reduce costs.
- Have you compared all your options? For example, a damaged tub could be replaced (~$5,000), relined (~$3,000 installed), or refinished/reglazed (~$600). Always weigh upfront costs against maintenance needs and expected lifespan.
Renovation Financing Options
Some projects can be paid out of pocket. Bigger renovations often require financing. Here’s a breakdown of the most common options:
Pay as you go (checking or savings). No borrowing, no interest, no qualification hurdles. This is the simplest approach for those who have the cash on hand.
Credit cards. A viable option for smaller projects or those done in stages. Pay in full by the due date each month and you’ll avoid interest charges and late fees entirely.
Personal loans. Unsecured financing available from banks, credit unions, or even family and friends. Because there’s no collateral, rates are higher than secured options — but qualification can be straightforward for borrowers with good credit.
Second mortgages. With home values having risen significantly in recent years, many homeowners have enough equity to take out a second loan secured by their property. The secured nature of the loan typically means lower rates than credit cards or personal loans. Just keep in mind: your home is on the line. Failing to repay could result in foreclosure, the same as a first mortgage.
HUD Title I loans. A government-backed financing option available through approved lenders. Key details:
- Loans of $7,500 or less are unsecured — no settlement required
- Single-family homeowners may borrow up to $25,000
- Loan terms range from six months to roughly 20 years
- No prepayment penalty if you pay it off early
Home equity lines of credit (HELOC). Think of a HELOC as a credit card secured by your home’s equity. It’s one of the most flexible options for larger renovation projects — you draw only what you need, and you can repay early to reduce interest costs.
With home equity at or near record highs for many owners, qualified borrowers may be able to access six figures or more. And unlike a lump-sum loan, your credit line stays open during the draw period, so you can tap it for future needs as well.
When comparing HELOCs, ask lenders how long the draw period lasts and what your repayment timeline looks like once it ends.
Ready to put your home equity to work? See how much you could access with a HELOC from Refi.com — and start your application in minutes.
