3 Ways To Finance Your Bay Area Home Upgrades

Article last updated July 2023

If you are considering upgrading your home, your next thought was likely, “How am I going to finance it?” Here are several great options to consider:

Home Equity Line of Credit (HELOC)

Simply stated, a Home Equity Line of Credit (HELOC) is a line of credit based on your home value that you can continually borrow from and pay back over a set time frame. HELOCs can be good people who need funds for ongoing home improvement projects or who need more time to pay down existing debt. HELOCs typically have lower interest rates than home equity loans and personal loans. In order to get the best rates, you will need to have a high credit score, a low debt-to-income ratio and a lot of tappable equity in your home.

Cash Out Refinance

A cash-out refinance provides a homeowner a set amount for a renovation that is then rolled into a new mortgage total, according to Dawn R. Cameron, a home mortgage consultant and renovation specialist with Wells Fargo Home Mortgage. Here’s an example: Let’s say a house is worth $200,000, and the mortgage is $100,000. The homeowner has 50% equity and the home renovation project will cost about $60,000. For a cash-out refinance, the original mortgage is paid off and replaced with a new mortgage of $160,000, giving the homeowners $60,000 in cash to do with as they please.

Home Renovation Partners

For homeowners who have very little equity, renovation financing might be an option. It’s similar to cash-out refinance, but instead of basing the loan on what the house is currently worth, a lender bases it on what the house will be worth when the renovation is complete. “For renovation financing, homeowners refinance their current loan but add on to it an amount needed for the home improvement. The lender then pays the contractor as the work is being done, so the bank is able to ensure the collateral is secure,” according to Cameron. Financing a home project takes planning. Homeowners should consider all the options and choose the financing path that is best for their project and financial situation. When looking into different loan options, consider talking to multiple lenders to get the best terms.

About the Author

Montana Gabrielle Hooks is a SF Bay Area Realtor in the East Bay. Local entrepreneurship, playing bass guitar and singing live karaoke are a few of her favorite things. She serves on the Young Realtists Division, Oakland board is a member of the Associated Real Property Brokers. Follow her on Instagram or learn more about her on her website.