Choosing the Best Option to Fund Home Improvements
As interest rates fluctuate and home values remain strong, many homeowners are choosing to stay in and make desired upgrades or improvements to their current homes instead of selling and buying an upgrade. In many cases, this means tapping into the equity they’ve built to finance these home improvements.
Whether you’re planning a modest upgrade or a major renovation, financing those projects carefully is just as important as selecting the right contractor or materials. Here are three common loan options to consider for home improvement projects.
Home Equity Line of Credit (HELOC)
A HELOC provides flexibility for homeowners who want ongoing access to funds. Instead of getting a lump sum, a HELOC offers a revolving line of credit that can be used as needed during a borrowing period, usually five to 10 years. This can be especially useful for projects completed in stages or for homeowners managing multiple improvements over time.
One advantage of a HELOC is that borrowers only pay interest on the amount they borrow, not the entire credit line. Rates are often lower than unsecured loans, and interest may be tax-deductible depending on how the funds are used. As balances are paid down, funds become available again, providing ongoing flexibility.
However, a HELOC is secured by your home. Borrowing against your equity decreases the amount of your home you own outright and may affect your proceeds if you sell. Because interest rates are often variable, payments can fluctuate over time, your minimum payment could decrease or increase significantly over the life of the loan. It is essential to ensure your budget can accommodate potential rate hikes in the future.
Home Equity Loan
For homeowners who prefer predictability, a home equity loan might be a better choice. This option offers a one-time lump sum that is repaid over a fixed period, usually five to 20 years, at a set interest rate. Monthly payments stay consistent, making it easier to plan and budget.
Home equity loans are effective for projects with a clear scope and cost, like replacing a roof, remodeling a kitchen or making accessibility upgrades. They usually have lower rates than credit cards or personal loans, and interest might be tax-deductible in certain situations.
Like with a HELOC, your home acts as collateral. Borrowers should think about how taking on more debt aligns with their overall financial goals and make sure they are comfortable with the long-term commitment.
Cash-Out Refinancing
Cash-out refinancing involves replacing your current mortgage with a larger new loan. The difference between this new loan and your existing mortgage balance is paid out to you in cash, which you can use for renovations or other major expenses.
This option can offer access to a substantial amount of funds at mortgage-like interest rates and combines borrowing into a single monthly payment. For homeowners who can secure a favorable rate and plan to stay in their home long enough to recoup closing costs, this can be an appealing choice.
However, refinancing resets your mortgage timeline and may increase the total interest you pay over time. It also decreases the amount of equity you own outright, which could be an important factor as life circumstances and housing markets evolve.
Choosing the Right Option
Homeowners can strategically use home equity to improve their living space while maintaining financial stability. Talk with your local mortgage lender about each of your options. Depending on the project size, how funds will be used, risk tolerance, and long-term financial goals, they can help you find one that meets your needs. Since home equity is often a homeowner’s most valuable asset, it’s important to consult trusted financial and tax professionals before moving forward. Investing in your home can be rewarding, but only if the financing strategy aligns with both your immediate needs and your future plans.
Kevin Cerveny (NMLS #1169757) is an SVP, consumer lending sales manager for Arvest Bank - Greater Kansas City and can be reached at kcerveny@arvest.com.
About Arvest
With more than $27 billion in assets, Arvest is a full-service bank that delivers financial solutions to individuals and businesses of all sizes. Since entering the Kansas City market in 2009, Arvest has grown to a top 20 bank and the sixth largest mortgage lender in the metro. The bank has 20 locations in the metro area. Arvest is an Equal Housing Lender and Member FDIC.
This story was originally published June 15, 2026 at 3:00 AM.