If your home no longer meets your needs, you have more than one way forward. You could sell and move — or you could stay and remodel.
Many homeowners overlook the fact that their home’s equity can be a powerful tool for funding improvements. Whether through a cash-out refinance, a renovation refinance, or a second mortgage like a HELOC, it’s possible to finance renovations without paying out of pocket or dipping into savings.
This guide explores how the true cost of selling compares to using your home equity to upgrade your space — and how to evaluate which option aligns best with your finances and goals.
Key Takeaways
- Selling your home can cost up to 10% of its value, not including the expense and hassle of moving. Tapping home equity may be a more practical alternative.
- Homeowners can access equity through a cash-out refinance, HELOC, or home equity loan, each with different structures, costs, and ideal use cases.
- Refinancing to renovate can be especially powerful if you have strong equity or want to consolidate debt, while second mortgages like HELOCs offer flexibility without changing your current loan.
The Costs of Selling Your Home
Selling a home often means more than just finding a buyer. Sellers typically pay 9% to 10% of the home’s sales price in transaction-related costs, such as:
- Real estate agent commissions
- Transfer taxes
- Title insurance
- Buyer concessions or credits
For example, on a $500,000 home sale, you might spend $45,000 to $50,000 in selling expenses. That doesn’t include the cost of preparing your home for sale, moving expenses, or closing costs on a new home purchase.
There’s also the potential challenge of finding a new property that checks all the boxes — and you may still need to make renovations after moving in.
Tapping Home Equity Instead: What to Know About the Costs
If you’re thinking about improving your current home rather than selling, tapping into your home equity can be an effective way to fund those updates. But as with selling, it’s important to understand the full cost picture — especially when comparing refinancing, a HELOC, or a home equity loan (HEL).
Common Costs Across Equity Products
Each home equity product comes with its own fee structure and trade-offs. Here’s a quick breakdown of what to expect:
| Product | Typical Costs | Notes |
| Cash-Out Refinance | 2%–5% in closing costs | Replaces your existing mortgage |
| HELOC | Often low or no upfront costs | May include annual fees; variable rate |
| Home Equity Loan | 2%–5%, similar to traditional mortgages | Fixed-rate second mortgage |
Refinancing to Fund Renovations
If you’re planning to stay in your home and want to make changes, a mortgage refinance is one way to tap into your home’s equity, especially if you want to roll both your current loan and renovation costs into one.
Cash-Out Refinance: A Versatile Option
A cash-out refinance replaces your existing mortgage with a larger one and gives you the difference as cash. It’s a popular option for funding renovations, consolidating debt, or covering major expenses, particularly for homeowners who have significant equity and don’t mind resetting their loan term.
- Typical LTV limit: Up to 80% of your home’s current value (conventional)
- Best for: Homeowners with strong equity and credit who want a single monthly payment
- Common uses: Renovations, debt payoff, tuition, investments, etc.
When Renovation Refinance Loans Make Sense
There are also renovation-specific refinance loans — such as Fannie Mae’s HomeStyle Renovation and the FHA 203(k) — that allow you to borrow based on your home’s future (post-renovation) value.
These programs may be useful if you:
- Don’t have enough existing equity for a standard cash-out refi
- Have large-scale renovation plans
- Want to maximize borrowing power based on projected home value
However, they often involve additional paperwork, require contractor quotes and project timelines, and may take longer to close. At Refi.com, we don’t currently offer renovation refinance products, but they’re worth knowing about if you’re exploring all financing options.
Quick Comparison: Cash-Out Refi vs. Renovation Refi
| Feature | Cash-Out Refi | Renovation Refi |
| Based On | Current Home Value | Projected Future Value |
| Common LTV | Up to 80% | Up to 97%+ |
| Process Complexity | Simpler | More complex (contractors, draw schedules) |
| Available at Refi.com | Yes | No |
Other Ways to Tap Your Equity: HELOCs and Home Equity Loans
Refinancing isn’t your only option. Depending on your goals and financial situation, a HELOC (home equity line of credit) might offer more flexibility, especially if you want to preserve your current mortgage rate.
Home Equity Line of Credit (HELOC)
A HELOC is a second mortgage that lets you borrow as needed over a draw period, often 5–10 years. You only pay interest on what you borrow, and you don’t have to refinance your existing mortgage.
Best for:
- Homeowners with low existing mortgage rates
- People who want to renovate in stages
- Borrowers who need flexible access to funds
Keep in mind: HELOCs usually have variable interest rates, which can fluctuate over time and may be higher than fixed-rate mortgage loans.
Quick Comparison: HELOC vs. Cash-Out Refi
| Feature | Home Equity Line of Credit (HELOC) | Cash-Out Refinance |
| Affects Current Mortgage | No – Adds a second mortgage | Yes – Replaces your current mortgage |
| Loan Structure | Revolving credit line, draw as needed | New larger mortgage, includes cash back |
| Best For | Ongoing/flexible expenses, phased renovations | Large one-time expenses, debt payoff, rate reset |
| Interest Rate Type | Variable (usually) | Typically fixed (can be adjustable) |
| Repayment | Interest-only during draw period, then amortized | Full principal & interest on refinanced loan |
| Closing Costs | Low to none (varies by lender) | Moderate to high (2%–5% of loan amount) |
| Common LTV Limit | 85%–90% combined LTV (CLTV) | 80% of home’s current value (LTV) |
If you’re unsure which makes more sense for your goals, a lender can help you run the numbers based on your credit, equity, and renovation plans.
Home Equity Loan (HEL)
A home equity loan is a fixed-rate second mortgage that provides a lump sum upfront. Unlike a HELOC, it has predictable payments and is best for homeowners who know exactly how much they need.
Like a HELOC, it allows you to keep your existing mortgage intact.
Quick Comparison: Home Equity Loan vs. Cash-Out Refinance
| Feature | Home Equity Loan (HEL) | Cash-Out Refinance |
| Affects Current Mortgage | No – Adds a second mortgage | Yes – Replaces your current mortgage |
| Loan Structure | Fixed-rate, lump sum | New larger mortgage, includes cash back |
| Best For | Set renovation budgets, one-time expenses | Large one-time expenses, debt payoff, rate reset |
| Interest Rate Type | Fixed | Typically fixed (can be adjustable) |
| Repayment | Separate second payment | Single payment (refinanced total loan) |
| Closing Costs | Moderate (similar to traditional mortgage) | Moderate to high (2%–5% of loan amount) |
| Common LTV Limit | ~85% of home’s current value (2nd position) | 80% of home’s current value (1st position) |
HELOC/Home Equity Loan Hybrid
Want the flexibility of a HELOC, but don’t like the variable rate? Some HELOC lenders allow you to lock in a portion of your borrowed balance at a certain interest rate.
For example, you have a $100,000-limit HELOC. You borrow $50,000 immediately and lock in the rate. Then you have a $50,000 open credit line to draw from and pay back as needed.
This structure limits your exposure to rate jumps, but not every lender offers them. Check with your HELOC lender before applying.
Bottom Line: Compare Your Options
Whether you sell your home or renovate it, both paths come with trade-offs. Using your home equity — through a cash-out refinance or a second mortgage like a HELOC — can offer a practical, cost-effective way to fund improvements without the upheaval of moving.
Ultimately, the right decision depends on your goals, finances, and how much equity you’ve built.
Ready to take the next step? Start your application today and explore which home equity option is right for you.
