Most homeowners pay for a remodel with one of six tools: cash and savings, a home equity loan, a HELOC, a cash out refinance, a personal loan, or a renovation loan like the FHA 203k. The right one depends on how much equity you have, how big the project is, and how fast you need the money. Cash is the cheapest if you have it. Home equity borrowing usually carries the lowest rate when you do not. Personal loans and contractor financing move fastest but cost the most.
Each option below comes with current rate ranges, real terms, and a simple way to match it to your project size and timeline. The perspective here is a contractor’s, not a lender’s, so treat it as a map of the choices rather than advice on which loan to sign.
Before you compare loans, know your number. A remodel financed to the wrong budget is a problem no interest rate fixes. If you have not priced the work yet, start with what it actually costs to remodel a house and how to budget for a remodel line by line, then come back here to fund it.
The six ways to pay for a remodel, at a glance
Here is how the common options stack up as of mid 2026. Rates move, so treat these as ranges to compare, not quotes.
| Option | Typical rate | Secured by your home | Best for |
|---|---|---|---|
| Cash and savings | 0% | No | Any size, if you have the reserves |
| Home equity loan | About 8% fixed | Yes | Large, one time projects |
| HELOC | About 7.5% variable | Yes | Phased or open ended projects |
| Cash out refinance | About 7% to 8% fixed | Yes | Large projects when a new mortgage makes sense |
| Personal loan | About 7% to 36% | No | Smaller projects, little equity, speed |
| Renovation loan (FHA 203k, HomeStyle) | Near mortgage rates | Yes | Buying a fixer or a whole home overhaul |
The pattern is consistent. Anything tied to your home equity is cheaper because the lender has collateral. Anything unsecured is faster and easier to get, and you pay for that convenience with a higher rate.
Cash and savings
Paying cash is the least expensive way to remodel, full stop. There is no interest, no application, no lien on your home, and no monthly payment hanging over the project.
The catch is timing and reserves. Saving for a large kitchen or a whole basement can push the project out by a year or more, and draining your emergency fund to avoid a loan is its own risk. A remodel almost always turns up a surprise once walls open, so keep a cushion. Our guide to how much to set aside for a contingency fund covers how big that cushion should be.
Cash is the clear winner when you have it and the project will not wipe out your safety net. For many homeowners, a blend works: cash for part of the job, financing for the rest.
Home equity loan
A home equity loan is a second mortgage. You borrow a lump sum against the equity in your home and pay it back at a fixed rate over a set term, often 5 to 30 years. As of mid 2026 the national average sits around 8%, though your rate depends on credit, income, and how much equity you keep.
Most lenders let your combined mortgage balances reach roughly 80% to 85% of the home’s value, so your borrowing room is your home’s value times that percentage, minus what you still owe.
Home equity loans fit large, well defined, one time projects: a full kitchen, a bathroom gut, a basement finish where you know the scope and want one predictable payment. You get all the money at closing and the rate never changes.
The trade offs are real. Your home is the collateral, so missed payments put it at risk. There are closing costs, and because you draw the full amount day one, you pay interest on the whole sum even if the work stretches over months.
HELOC (home equity line of credit)
A HELOC is a revolving credit line secured by your home, closer to a credit card than a fixed loan. You get a limit, draw what you need during a draw period that usually runs about 10 years, and pay interest only on what you have actually used. After the draw period you repay the balance, often over about 20 years.
HELOC rates are variable and tied to the prime rate. As of mid 2026 the national average is around 7.5%, slightly below fixed home equity loans, but because it floats, your payment can rise if rates climb.
A HELOC shines on phased or open ended remodels. If you are finishing a basement this year and the bathrooms next year, or you expect change orders, you draw as costs land instead of borrowing a lump sum up front. Funding a project in stages pairs naturally with a line of credit, since you are not paying interest on money you have not spent yet.
The risk is the flip side of the flexibility. The rate can move, the payment can jump when the draw period ends, and an open line can tempt you to keep spending past the plan.
Cash out refinance
A cash out refinance replaces your existing mortgage with a new, larger one and hands you the difference in cash. If your home is worth $300,000, you owe $180,000, and you refinance to $240,000, you walk away with about $60,000 for the remodel, minus closing costs.
Lenders typically cap a cash out refinance at 80% of the home’s value, meaning you keep at least 20% equity. Rates track 30 year mortgage rates, running roughly 7% to 8% in mid 2026 depending on your profile.
The math only works in your favor in specific cases. A cash out refinance makes sense when you are pulling a large sum and the new rate is at or below your current mortgage rate, or close enough that the cash is worth it. If your existing mortgage is locked in at a low rate, refinancing the whole balance to fund a remodel can cost far more in the long run than a second loan that leaves the first mortgage alone. Closing costs are higher than a home equity loan or HELOC because you are redoing the entire mortgage.
Personal loan
A personal loan is unsecured, so it is not tied to your home. You borrow a lump sum and repay it at a fixed rate, usually over 2 to 7 years. Because there is no collateral and the approval is fast, rates run higher and wider: roughly 7% to 36% APR in 2026, with borrowers who have strong credit landing near the low end and average rates around 12%.
Personal loans fit smaller projects, homeowners with little or no equity, and anyone who needs money quickly. There is no appraisal and no lien, funding can hit in days, and if you do not have equity to tap, this is often the realistic path. A single bathroom refresh or a deck is a natural fit.
The cost is the rate. On a large remodel, the higher APR adds up fast compared with home equity borrowing, and the shorter term means a bigger monthly payment. Interest on a personal loan is also not tax deductible, because the loan is not secured by the home.
Renovation loans: FHA 203k and Fannie Mae HomeStyle
Renovation loans are built for a specific situation: financing the purchase or major overhaul of a home based on what it will be worth after the work, not what it is worth today. That after renovation value is what makes them different from every other option here.
The FHA 203k rolls a home purchase or refinance and the renovation into one government backed mortgage. It allows down payments as low as 3.5% and credit scores down to 580, which makes it accessible, but it is for primary residences only and carries FHA mortgage insurance, including an upfront premium of 1.75% of the loan plus an annual premium. It comes in a Limited version for smaller cosmetic work and a Standard version for larger structural projects.
The Fannie Mae HomeStyle is the conventional counterpart. It needs a higher credit score, around 620, and a debt to income ratio under 45%, but it allows as little as 3% down, has no upfront mortgage insurance premium, lets you cancel PMI later, and can be used on second homes and investment properties with far fewer restrictions on the type of improvement.
These loans involve more paperwork, licensed contractor requirements, and inspections than a simple home equity loan, so they earn their place mainly when you are buying a fixer upper or funding a top to bottom renovation, not a single room.
Contractor and point of sale financing
Many remodelers offer financing at the kitchen table through a third party lender such as GreenSky or Synchrony. You apply on the spot, often get a decision in minutes, and the funds go straight to the contractor. It is convenient, and for strong credit borrowers a promotional 0% period can be genuinely useful on a project you will pay off quickly.
Read the fine print before you sign, because two features catch homeowners off guard.
- Deferred interest. Some promotional plans are not the same as true 0% interest. If you do not pay the full balance before the promo window closes, interest can be charged retroactively from day one, which turns a “no interest” offer into a very expensive one.
- Pressure and comparison. An offer handed to you mid sales conversation can push you to commit before you have compared it against a HELOC or a bank personal loan. The federal Consumer Financial Protection Bureau has taken action against point of sale lenders over how these loans were originated, so it pays to slow down.
Point of sale financing is a tool, not a trap, but only when the terms are competitive and you have compared them against at least one outside option.
How to Finance a Home Remodel for Your Project Size and Timeline
Rates matter, but the cleaner question is which tool fits your project’s size, your equity, and your timeline. Use this as a starting frame.
- Small project, under roughly $15,000, little equity or need it fast: a personal loan or a paid off promotional contractor plan. Speed beats the rate premium on a smaller balance.
- Large one time project, solid equity, want a fixed payment: a home equity loan. Predictable rate, one lump sum, done.
- Phased project or uncertain final cost, solid equity: a HELOC. Draw as the work lands, pay interest only on what you use.
- Large project and refinancing the whole mortgage actually helps: a cash out refinance, but only if the new rate is not meaningfully higher than your current one.
- Buying a fixer or doing a whole home overhaul: an FHA 203k or Fannie Mae HomeStyle renovation loan, priced on the after renovation value.
- You have the cash and reserves to spare: pay cash, or blend cash with a smaller loan.
Whatever you choose, borrow to a real number, not a hopeful one, and leave room for the contingency every remodel needs. Overreaching against your home’s value is a common trap, and our look at the 30 percent rule for remodel spending and home value explains how much is too much. Financing to an accurate scope is why we give fixed, transparent estimates after an on site visit rather than a rough phone figure.
What Pennsylvania homeowners should know before signing
Financing is only half the paperwork. In Pennsylvania, the Home Improvement Consumer Protection Act (HICPA) sets rules that protect you no matter how you pay.
- Deposit cap. On a home improvement contract over $1,000, a contractor cannot require a down payment larger than one third of the contract price, plus the cost of any special order materials. A demand for half up front is a red flag.
- Three day cancellation. You have the right to cancel a home improvement contract within three business days, and that right applies regardless of where the contract was signed.
- Registered contractors. Home improvement contractors operating in Pennsylvania are required to be registered with the state. Ask for the registration number and confirm the business is licensed and insured.
These protections exist so financing pressure never rushes you into a bad contract. A reputable local contractor will welcome the questions, not dodge them.
The right financing for your Wilkes-Barre home
There is no single best way to finance a remodel, only the best fit for your equity, your project, and your timeline. Cash wins on cost when you have it. Home equity loans and HELOCs win on rate when you do not, with the loan suiting one big project and the line suiting a phased one. Personal loans and contractor financing win on speed and access, at a higher price. Renovation loans stand alone for buying or overhauling a whole home.
Sizing the loan correctly starts with an accurate estimate. At 570 Remodeling, we visit your home, assess the real scope, and give you fixed, transparent pricing so you know exactly what you are financing before you talk to a lender. Call us at (570) 938-4541 or request a free quote, and you will have a real number to build your plan around.
Frequently asked questions
What is the best way to finance a home remodel?
The lowest cost option is cash if you have it. If you do not, borrowing against your home equity through a home equity loan, a HELOC, or a cash out refinance usually carries the lowest interest rate because the loan is secured by your home. Personal loans and contractor financing are faster and need no equity, but cost more. The best fit depends on your project size, how much equity you have, and how quickly you need the money.
Is it better to pay cash or finance a remodel?
Paying cash avoids all interest and is the cheapest route, as long as it does not drain your emergency reserves. Financing makes sense when the project cannot wait, when keeping cash on hand matters, or when a low secured rate costs less than delaying the work. Many homeowners blend the two, paying part in cash and financing the rest.
Can you finance a remodel with no home equity?
Yes. An unsecured personal loan does not require equity and funds quickly, though at a higher rate. Contractor point of sale financing and, for a home purchase paired with renovation, an FHA 203k or Fannie Mae HomeStyle loan are also options that do not depend on existing equity, since renovation loans are based on the home’s value after the work is done.
Is home improvement loan interest tax deductible?
Interest on a home equity loan, HELOC, or cash out refinance is generally deductible only if the money is used to buy, build, or substantially improve the home that secures the loan, and only if you itemize deductions. The combined mortgage debt eligible for the deduction is capped at $750,000 for most filers. Interest on an unsecured personal loan used for a remodel is not deductible. Tax rules are specific to your situation, so confirm the details with a tax professional.
What credit score do you need to finance a remodel?
It varies by product. FHA 203k renovation loans can go as low as 580, and Fannie Mae HomeStyle loans generally want around 620. Home equity loans, HELOCs, and the best personal loan rates typically favor scores in the high 600s and up. A lower score does not always mean no, but it usually means a higher rate.
Should I use the financing my contractor offers?
It can be convenient and occasionally competitive, especially a true 0% promotional plan you will pay off in the window. Before you sign, check whether the promotion is deferred interest, which can charge interest retroactively if you do not pay in full in time, and compare the offer against at least one outside option like a HELOC or a bank personal loan. Never let an at home sales moment rush the decision.
Does 570 Remodeling offer financing?
570 Remodeling is a remodeling contractor, not a lender, so the financing choice stays in your hands. What we provide is an accurate, fixed, transparent estimate after visiting your home, so you know the real number before you approach a bank, a credit union, or any financing program. Call (570) 938-4541 or request a free quote to get started.
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