How a Home Equity Loan Can Help You Pay for Home Improvement Projects

How a Home Equity Loan Can Help You Pay for Home Improvement Projects

If you’re like most homeowners, you have a long list of home improvement projects. Some are big like remodeling a kitchen or bath, and some are small, like a fresh coat of paint. Experienced homeowners know that it’s not easy or cheap to do all your improvements at once, which is why most of us chip away little by little at making a house a home.

If you have a long to-do list but aren’t sure how to pay for it, you’re not alone. Charging large expenses on your credit card is usually not the best way to pay for home improvement projects. That’s because the interest rate on credit cards is relatively high compared to other options. According to, the national average credit card rate on December 10, 2018 was 17.15%. That’s ok if you carry a small balance or pay your balance in full each month. But if your balance is in the thousands of dollars you’ll rack up interest charges quickly. Side note – check out We Florida Financial’s credit card rates. The rate you pay is based on your credit score so the better your credit, the lower your rate.

When you have large expenditures like remodeling, a home equity loan is a much more affordable way to pay for your home improvement projects. A home equity loan allows you to borrow against the equity you’ve built up in your home. You’ve built up equity by making your monthly mortgage payments over the years or from your home appreciating in value over time. Here’s an example: let’s say that your home is worth $300,000. You’ve been making mortgage payments for several years and now your mortgage balance is $200,000. Your equity is the difference, or $100,000. Lenders will not usually let you borrow all of that, but will lend you a percentage such as 70% to 90% of your equity, based on your credit score and the type of home you own (single family home vs. a condo). They also take into account your ability to repay your loan which means that your income and payment history factor into how much you can borrow.

A home equity line of credit is a popular way to pay for home improvement. A line of credit works similarly to a credit card. You get approved for a credit limit, and can borrow what you need, when you need it, up to your available credit limit. As you make payments on your line of credit each month, the money is available for you to borrow again when you need it.

Let’s use a kitchen remodel as an example. Your contractor asks for a down payment to secure your job, so you borrow from your home equity line of credit and give him the down payment. Then he needs another payment to purchase your new appliances, so you borrow again. The final payment is due when the job is complete, so you borrow from your line of credit again. The benefit to borrowing with a home equity line of credit is that you only pay interest on the money that you borrow. So if the entire kitchen remodel project ultimately costs less than your home equity line of credit limit, you don’t pay interest on the money you didn’t use.

Once the kitchen remodel is done, you may decide you want to remodel a bath or add a swimming pool. Your home equity line of credit will be waiting for you and you still only pay interest on the amount you borrow.

We’ll take care of all the details. You don’t need to brush up on home loan terminology to get a home equity loan. Just give us a call and we’ll let you know how much you qualify for. The time from application to closing is usually just a few weeks - sometimes more, sometimes less. If you’re ready to learn more, please visit our home equity loan page or give us a call at 954-745-2400 and select option 4 from the main menu.

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