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Home Equity Loans
Using a HELOC or home equity loan for a remodel
Updated Jul 25, 2026
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Key takeaways:
A home equity line of credit (HELOC) or home equity loan could fund repairs, renovations, and upgrades using the equity in your home as collateral.
HELOCs offer a draw period that gives you flexibility to borrow, repay, and borrow again up to your credit limit. A home equity loan is a one-time lump sum payment.
The interest could be tax-deductible when the funds go toward buying, building, or substantially improving the home you borrowed against.
A home remodel can take your home from comfortable to luxurious and your dream in a matter of months. While worthwhile, the project could require a sizable budget, and if you can’t cover the costs with cash, you may need to explore financing options.
A home equity line of credit (HELOC) or home equity loan could put the equity in your home to work for you. Equity is the difference between your home’s market value and the balance on your mortgage. If you’ve built enough equity, you could borrow against it to fund anything from overdue repairs to a full kitchen renovation, all without refinancing your first mortgage or giving up your current interest rate.
When deciding between a HELOC and a home equity loan for home improvements, the right fit depends on your project and how you want to borrow. Home remodeling projects could increase your home’s value or provide you with a lifestyle improvement that is priceless to your family.
Using home equity for home improvements
One of the most common reasons homeowners borrow against their home equity is to make improvements. The list of projects a HELOC or home equity loan could cover is long. Here are some of the most common uses:
Repairs and maintenance. Roof replacements, new siding, HVAC systems, water heaters, septic tanks, plumbing overhauls, and gutter restoration all fall under this category. This kind of upkeep protects your home’s structure. It could also stop a small problem from turning into an expensive emergency.
Energy-efficient upgrades. Upgrades such as solar panel installations or high-efficiency windows and doors could lower your utility costs, and these renovations could qualify for federal or state tax incentives in addition to the HELOC interest deduction.
Room additions and ADUs. Adding square footage, such as a new bedroom, a sunroom, or an accessory dwelling unit (ADU), could give your family more space and potentially boost your home’s value.
Aging-in-place renovations. Grab bars, stairlifts, widened doorways, main-floor-living conversions, improved lighting, and low-maintenance landscaping are all modifications that could help you stay comfortably in your home as you age.
Kitchen, bathroom, and cosmetic remodels. Countertops, cabinetry, flooring, fixtures, and design updates could be among the highest-impact renovations for both your daily comfort and your home’s resale value.
Outdoor and luxury projects. Pool installations, composite decks, screened-in porches, and landscaping are luxury items that could deliver a return on investment. They also could add joy to your daily life.
The IRS offers a financial incentive for using a HELOC or home equity loan to fund home improvement. Mortgage interest may be tax-deductible when the funds go toward buying, building, or substantially improving the home that secures the loan. Talk to a tax professional to find out whether your planned home improvement projects qualify for a tax deduction.
HELOC vs. home equity loan for home improvements
Both a HELOC and a home equity loan are secured by your home. This means your home backs up the loan, and the lender could foreclose if you stop making payments. If you're still paying your primary mortgage, these loans are second mortgages.
Where they differ is in the structure. One is a credit line and the other an installment loan. Here's what that means to you.
How a HELOC works
A HELOC gives you a draw period during which you’re able to borrow, repay, and borrow again, up to your credit limit. After the draw period ends, you enter the repayment phase and can't borrow more.
You're only charged interest on the amount you borrow. Many HELOCs have a variable interest rate during the draw period, meaning your rate and payment could go up or down over time.
How a home equity loan works
A home equity loan isn't reusable. You receive a one-time lump sum upfront, and you begin repaying it right away. You make fixed monthly payments over a set term.
You're charged interest on the full amount you borrow. Home equity loans typically come with a fixed interest rate, so your payment is the same each month for the life of the loan.
Which is better for your home improvement project
The right choice often depends on the scope and timeline of your project.
A HELOC could work well if you want borrowing flexibility for a few years. It could be an ideal solution for larger projects you plan to tackle in phases, or for projects where the budget may increase as you go.
A home equity loan could make more sense if you’re looking for a one-time loan with a fixed payment from day one. It could be the right solution for a single project with a clear budget.
Learn more about what it takes to qualify for a HELOC and home equity loan requirements before making a final decision. Lenders consider your credit score, income, existing debt, and how much equity you have.
You should also consider how long it takes to get a HELOC or home equity loan so you know when to apply and what to expect with the funding timeline to plan your project accordingly.
HELOC for home improvement: pros and cons
Pros | Cons |
Pay interest only on the amount you borrow | If you have a variable rate, your payment could increase over time |
Flexible borrowing that suits phased or ongoing projects | May have closing costs of 0% to 6% amount borrowed, plus ongoing or withdrawal fees |
Interest could be tax-deductible for qualifying home improvements | Borrowing reduces the equity in your home |
Lower rates, on average, than unsecured borrowing options | Your home is collateral. If you don’t repay the loan, you could lose your home. |
Home equity loan for home improvements: pros and cons
Pros | Cons |
Fixed interest rate and fixed monthly payment from the start | You need a new loan if you want to borrow more |
Predictable repayment schedule helps make budgeting straightforward | May have closing costs of 0% to 6% amount borrowed |
Interest could be tax-deductible for qualifying home improvements | Borrowing reduces the equity in your home |
Lower rates, on average, than unsecured borrowing options | Your home is collateral. If you don’t repay the loan, you could lose your home |
Advantages of using home equity for home improvement
Here are some advantages to consider as you compare funding options:
Interest could be tax-deductible. If the funds are used to make qualifying improvements to the home securing the loan, you could deduct the interest at tax time. Consult a tax professional for guidance specific to your situation.
Potentially lower interest rates. Because your home secures the loan, lenders typically offer rates lower than those of credit cards or unsecured personal loans.
No refinancing. Using the equity in your home doesn't require refinancing your mortgage or giving up your current mortgage interest rate.
Flexible draw period (HELOC). With a HELOC, you could fund your project, pay down the balance, and borrow again up to your credit limit. That flexibility is valuable when renovation costs are hard to predict. Achieve Loans offers a fixed-rate HELOC, so you get that flexibility without the uncertainty of a variable rate.
Higher borrowing limits. Because the loan is secured by the equity in your home, HELOCs and home equity loans could provide access to larger loan amounts than an unsecured loan.
Disadvantages of using home equity for home improvement
No financial product is perfect, including HELOCs and home equity loans. Before borrowing against the equity in your house, be sure to weigh the pros and cons, including these potential disadvantages:
Your home is used as collateral. This is really important. Both a HELOC and a home equity loan are mortgages, secured by your home. If you don't make your payments and default on the loan, you could lose your home through foreclosure.
There is less equity if you borrow. Borrowing against your home equity means having less equity available if you need it for an emergency or decide to sell the property. Having less equity could also mean owing more on your home than it's worth if home values in your area decrease.
Interest adds up over time. Any time you pay interest over the course of years, the total cost could impact your ability to save, invest, or spend on other needs.
Considerations before using home equity for home improvements
Before you apply for a HELOC or home equity loan for a remodel, take a step back and do some research. A little planning upfront could save you money and stress down the road.
Know how much equity you have
Your equity is the difference between your home’s current market value and what you still owe on your mortgage (plus any second mortgages). Many home equity lenders require that your combined loan-to-value ratio (CLTV) stay at or below 80%. You could get a rough estimate with a HELOC calculator and then confirm with your lender.
Set a realistic budget and payment plan.
Get project estimates from contractors before you borrow. Factor in a cushion for unexpected costs. Then confirm that the monthly payment fits your budget without squeezing the rest of your finances. A second mortgage means a second payment alongside your first mortgage.
Compare lenders and terms
Interest rates, draw period lengths, repayment terms, fees, and whether the rate is fixed or variable all affect your total cost. Comparing offers from multiple lenders is one of the best ways to ensure you’re getting terms that work for your situation.
Author Information
Written by
Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.
Reviewed by
Natasha is a contributing writer for Achieve. She has been a financial writer for nearly a decade. She excels at providing realistic strategies to help readers improve their knowledge and change their financial situations.
Frequently asked questions about using a HELOC or home equity loan for home improvement
You could apply for a HELOC or a home equity loan through a lender. The lender evaluates your credit score, income, debt, and how much equity you have to determine whether you qualify and how much you could be approved to borrow. If approved, you could use the funds to pay for contractors, materials, permits, and other project costs.
Yes. If you have sufficient equity and meet the lender’s requirements for credit score, income, and debt, you could borrow against the equity in your home for a remodel. Both HELOCs and home equity loans are designed for this purpose.
Yes, if you can get terms that fit your budget and project. A home equity loan for a remodel could make sense if you know the full cost of your project ahead of time and want a fixed rate and fixed payment from day one. If your project will unfold in phases and costs are harder to pin down, a HELOC could give you more flexibility. Both could have tax benefits when used to remodel your home.
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