When you have lived in a home for several years, renovations often move from optional to necessary. Aging systems, changing family needs, and rising energy costs make upgrades unavoidable. Whether you are tackling minor repairs, planning a major renovation, or completing a full remodel, one factor remains constant—cost.
Home improvement loans provide a practical way to finance upgrades without draining savings. With flexible repayment terms and typically lower interest rates than credit cards, these loans allow homeowners to improve comfort, efficiency, and property value while spreading costs over time.
Reasons to Refinance Your Home
A home improvement loan is when you borrow money from a bank, lender, or financial institution based on their terms to upgrade your property.
Home improvement loans are different from home refinance loans—they’re shorter-term and typically for smaller amounts. But the steps to secure one are straightforward if you do your homework.
If you're planning to apply soon, here are the steps to follow:
Lenders want to know exactly how the loan proceeds will be used. Being specific—whether it is replacing plumbing, adding a patio, or upgrading insulation—helps justify the loan and demonstrates planning discipline.
Well-defined projects that improve safety, livability, or property value often strengthen approval odds.
Calculate total project costs, including materials, labor, permits, and inspections. Add a 10–20% contingency buffer to account for unexpected issues. Borrowing only what you need can reduce long-term interest costs.
Paying a portion of the renovation in cash can also improve loan terms and lower monthly payments.
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Home equity—the portion of your home you own outright—often plays a key role in loan eligibility. Even with strong equity, lenders will still evaluate your income stability and debt-to-income ratio to confirm repayment ability.
Loan terms, interest rates, and maximum borrowing amounts depend on both equity and creditworthiness.
Before applying, review your credit report to identify errors or areas for improvement. Lenders rely heavily on credit scores when pricing loans.
If necessary, taking a few months to reduce debt balances or correct inaccuracies can significantly improve approval odds and interest rates.
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Most lenders will request:
Organizing these documents early can speed up underwriting.
Pre-qualification provides an initial estimate of how much you may be able to borrow based on self-reported financial information. This step is often completed online or over the phone and helps set realistic expectations.
Pre-approval involves a formal application and document verification. Once approved, you will receive specific loan terms and maximum borrowing limits.
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Here are the most common types of loans to consider:
These are unsecured loans where you borrow a fixed amount. Your interest rate depends on your credit score, loan amount, and term. No collateral is needed, but interest rates may be higher.
A personal loan doesn’t require collateral, so your assets aren’t at risk. Secured personal loans often offer better interest rates and loan amounts than unsecured ones.
They typically have shorter repayment terms, so you’ll pay less interest overall.
These loans are funded by multiple individual investors who contribute small amounts. Your credit score, amount, and term influence your interest rate.
Repayment periods are short, but interest rates are often higher than other loan types.
One of the most popular options. Home equity loans have longer terms, lower monthly payments, and possibly tax-deductible interest. Just note that longer terms mean more total interest over time.
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Cash-out refinancing replaces your current mortgage with a larger one—and you get the difference in cash.
You’ll have lower borrowing rates but a longer repayment period.
Thanks to the Tax Cuts and Jobs Act of 2017, most personal residence improvements aren’t tax-deductible. However, two exceptions still apply:
Examples include:
Note: Only eligible if these don’t increase the home's value.
Also, if you sell your home for a profit, you may exclude up to $250,000 in gains ($500,000 for married couples filing jointly).
Improvements can get pricey—unexpected issues often arise. Experts recommend a 10–20% contingency fund.
Here are smart ways to stay on track:
From small repairs to full-scale renovations, home improvements require careful financial planning. A well-structured home improvement loan can make upgrades affordable while protecting long-term financial health.
If you are ready to explore financing options tailored to your renovation goals, Mares Mortgage offers expert guidance and customized solutions.
👉 Ready to get a home improvement loan? Let Mares Mortgage help!
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