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Key Takeaways
- Not all home improvement loans are created equal, your best option depends on how much equity you have and how fast you need the money.
- If you have home equity, use it because equity-based loans almost always beat personal loans and credit cards on rate.
- The FHA 203(k) is one of the most underused loan products out there, and it could be a game-changer if you’re buying a home that needs work.
Check home improvement loan options and rates. Start here
Planning a renovation and not sure how to pay for it? From tapping your home equity to taking out a quick personal loan, the right financing depends on your project size, how much equity you have, and how fast you need the funds.
In this guide, we break down the six most common home improvement loan types, compare their rates and requirements, and help you figure out which one makes the most sense for your situation.
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What are the different types of home improvement loans?
If you’re planning home improvements and weighing your financing options, here’s a quick breakdown of the most common loan types.
Different types of home improvement loans
- Home Equity Loan: A fixed-rate lump sum borrowed against your home’s equity. Best for large, one-time projects with predictable costs.
- HELOC (Home Equity Line of Credit): A revolving credit line based on your equity. You borrow as needed, making it ideal for ongoing or phased renovations.
- Cash-Out Refinance: Replaces your current mortgage with a larger one, letting you take out the difference in cash. Helpful if you want to tap equity and possibly secure a better rate.
- FHA 203(k) Loan: Government-backed loan that combines the cost of buying (or refinancing) a home with renovation expenses. Offers a low down payment and flexible credit requirements.
- Personal Loan: A fast, unsecured loan that doesn’t require home equity. Good for smaller projects or when you need money quickly.
- Credit Card: Offers immediate access to funds for minor upgrades or repairs. May work well if you qualify for a 0% introductory APR period.
Check home improvement loan options and rates. Start here
Home improvement loan options compared
| Loan Type | Approval Time | Typical Credit Score | Loan Amount Range | Max LTV / Collateral | Interest Rate Type | Flexible Use |
|---|---|---|---|---|---|---|
| HELOC | 2–6 weeks | Varies by lender (often 620+) | Depends on equity and lender | Secured by home equity | Variable | Yes |
| Home Equity Loan | 2–6 weeks | Varies by lender (often 620+) | Depends on equity and lender | Secured by home equity | Fixed | Yes |
| FHA 203(k) Loan | 4–8 weeks | 580+ (per FHA; many lenders require higher) | Based on FHA limits (Limited up to $75,000 in rehab costs) | Secured by home | Fixed | Restricted |
| Cash-Out Refinance | 4–6 weeks | 620+ | Up to 80% of home value (conventional) | Secured by home | Fixed or variable | Yes |
| Personal Loan | 1–7 days | Varies by lender | Typically $1,000–$50,000+ (varies by lender) | Unsecured | Fixed | Yes |
| Credit Card | Minutes to hours | Varies by lender | Varies by credit limit | Unsecured | Variable | Yes |
For specifics, see pool financing options.
We cover garage remodel costs in a dedicated guide.
How home improvement loan rates compare (September 2026)
Before choosing a loan type, it helps to understand how rates generally compare across your options, even if current mortgage rates shift week to week.
As a rule of thumb, equity-based loans tend to offer the lowest rates because your home serves as collateral. HELOCs and home equity loans typically come in lower than personal loans, while cash-out refinances are tied to primary mortgage rates. Personal loans sit higher on the rate spectrum, and credit cards typically carry the highest rates of all, unless you can take advantage of a 0% intro APR offer.
A few things worth keeping in mind as you shop:
If you already have a low mortgage rate, a HELOC or home equity loan is often the smarter play. You keep your existing rate and still access your equity without replacing your mortgage.
If you don’t have equity yet, a personal loan is your most accessible path. Rates are higher than equity-based options, but approval is fast and your home isn’t on the line.
Your credit score matters a lot. The difference between a good and excellent credit score can mean a full percentage point or more on any of these products. On a $50,000 loan, that gap adds up to thousands of dollars over the life of the loan.
What experts are saying
Thomas Brock, CFA, CPA
“In my experience, homeowners often make the mistake of choosing a home improvement loan based strictly on the interest rate. I’ve seen people focus so heavily on getting the lowest rate possible that they overlook other critical factors, such as closing costs, repayment terms and, most importantly, what happens to their existing mortgage.
If a homeowner has a relatively low-rate first mortgage, refinancing the entire balance just to access the equity can be an expensive way to borrow. In many cases, taking out a home equity loan or HELOC at a higher rate can be economically superior – because it allows the homeowner to preserve the low rate on the existing mortgage.”
Best types of home improvement loans
Now that you’ve seen a quick summary of the different options, let’s take a closer look at each loan type. Understanding how they work, their pros and cons, and who they’re best for can help you make a more confident financing decision.
1. Home equity loan
A home equity loan lets you borrow against the equity you’ve built in your home, which is the home’s value minus your remaining mortgage balance.
Check your home equity loan options. Start here
Unlike a cash-out refinance, it doesn’t replace your current mortgage. You’ll keep making payments on your existing loan, plus a separate payment for the new home equity loan.
Home equity loan quick facts
| Loan amount | Based on your equity and the lender’s limits (often up to about 80% to 85% of appraised value minus your current mortgage balance, varies by lender) |
| Funding timeline | 2 to 6 weeks |
| Repayment term | 5 to 30 years, with 10 to 15 years being most common |
| Requirements | Typical lender requirements (vary by lender): meaningful home equity, a solid credit score, a manageable debt-to-income ratio, and sufficient income |
| Project type | Major remodels, fixed-cost projects |
| Ideal candidate | Established homeowner, strong equity, prefers fixed payments |
Key Benefits
2. HELOC (home equity line of credit)
A home equity line of credit (HELOC) is another great way to borrow from your home equity without refinancing. A HELOC is similar to a home equity loan, but it works more like a credit card. You can borrow from it up to a preapproved limit, pay it back, and borrow from it again.
Check your HELOC options. Start here
HELOC quick facts
| Loan amount | Based on your equity and the lender’s limits (often up to about 80% to 85% of appraised value minus your current mortgage balance, varies by lender) |
| Funding timeline | 2 to 6 weeks |
| Repayment term | 10 to 20 years |
| Requirements | Typical lender requirements (vary by lender): meaningful home equity, a solid credit score, a manageable debt-to-income ratio, and sufficient income |
| Project type | Phased, ongoing, variable-cost projects |
| Ideal candidate | Homeowner with equity, good credit, flexible |
Key Benefits
Quick Fact
According to the 2025 Remodeling Impact Report from the National Association of Realtors, 54% of homeowners used a home equity loan or line of credit (HELOC) to fund their latest remodel.
Source: National Association of Realtors, 2025 Remodeling Impact Report.
3. Cash-out refinance
Another popular way to get money for a home remodeling project is a cash-out refinance. With this option, you refinance to a new mortgage loan with a bigger balance than what you currently owe. Then you pay off your existing mortgage and keep the remaining cash.
Check your eligibility for a cash-out refinance. Start here
The money you receive from a cash-out refinance comes from your home equity. It can be used to fund home improvements, although there are no rules that say cash-out funds must be used for this loan purpose.
Cash-out refinance quick facts
| Loan amount | Up to 80% of your home’s appraised value minus your current mortgage balance (per Fannie Mae) |
| Funding timeline | 4 to 6 weeks |
| Repayment term | 15 to 30 years (based on new mortgage term) |
| Requirements | At least 20% equity, a credit score of 620 or higher, stable income, and acceptable debt-to-income ratio |
| Project type | Large, one-time, fixed-cost renovations |
| Ideal candidate | Homeowner with strong equity, stable finances, and a higher-rate existing mortgage they can refinance |
Key Benefits
4. FHA 203(k) rehab loan
An FHA 203(k) rehab loan lets you finance your home purchase and renovation costs with a single mortgage, no need for two separate loans or double closing costs.
Check your eligibility for an FHA 203(k) loan. Start here
It’s a great option if you’re buying a fixer-upper and need funds for improvements right away. Backed by the government, it also offers perks like a low down payment and more flexible credit requirements.
FHA 203(k) refinance quick facts
| Loan amount | Up to 110% of the home’s projected after-improved value (FHA uses the lesser of that or the as-is value plus rehab cost, all capped at county FHA loan limits) |
| Funding timeline | 4 to 8 weeks |
| Repayment term | 15 to 30 years |
| Requirements | 580+ credit score for maximum financing per FHA (many lenders require a higher score on 203(k) loans), 3.5% down payment, must be used for a primary residence |
| Project type | Necessary or approved improvements (e.g., structural repairs, modernization); luxury upgrades not allowed |
| Ideal candidate | Buyers purchasing a fixer-upper who want to finance renovations as part of the mortgage |
Key Benefits
Standard vs. Limited FHA 203(k): What’s the Difference?
The Standard 203(k) loan is for major or structural renovations requiring a consultant, while the Limited 203(k) covers smaller, non-structural repairs and improvements up to $75,000 with a simpler process. HUD raised the Limited 203(k) cap from $35,000 to $75,000 for case numbers assigned on or after November 4, 2024, and HUD reviews the limit annually.
5. Personal loan
If you don’t have enough home equity to borrow from, a personal loan is another way to finance home improvements.
Because a personal loan is unsecured, you won’t use your home as collateral. That means these loans can be obtained much faster than HELOCs or home equity lines of credit. In some cases, you may be able to get loan funding on the next business day or even same-day funding.
Personal loan quick facts
| Loan amount | Typically $1,000 to $50,000+ (varies by lender) |
| Funding timeline | 1 to 7 days (often faster for online lenders) |
| Repayment term | Usually 2 to 7 years (varies by lender) |
| Requirements | Credit score, proof of income, and debt-to-income requirements that vary by lender |
| Project type | Any home improvement project, with no restrictions on use |
| Ideal candidate | Borrowers seeking quick, unsecured funds for small to medium home improvement projects without using home equity |
Key Benefits
6. Credit cards
You could always finance some or all of your remodeling cost with plastic, too. This is the quickest and simplest financing option for a home improvement project.
But because home improvements often cost tens of thousands of dollars, you need to be approved for a higher credit limit. Or, you’ll need to use two or more credit cards. Plus, you’ll likely pay interest rates that are much higher than those charged by home improvement loans.
Credit cards quick facts
| Loan amount | Varies by credit limit; typically up to $10,000 or more |
| Funding timeline | Minutes to hours |
| Repayment term | Revolving credit: minimum monthly payments; can pay over months or pay in full |
| Requirements | Credit approval based on credit score, income, and credit history |
| Project type | Any home improvement expense, small or large |
| Ideal candidate | Borrowers needing fast, flexible access to funds, who can manage revolving credit responsibly |
Key Benefits
Check your home improvement loan options. Start here
Additional resources
Looking for more information? We’ve created additional articles that explore specific options for people who may be seeking renovation financing. For a deeper dive, be sure to check out the resources below.
How to Get a Home Improvement Loan
Using a HELOC for Home Improvements
How to Use a Personal Loan for Home Improvement
How to Finance a Home Renovation Without Equity
Home improvement loans FAQ
Get started on your home improvement loan. Start here
The best loan for home improvements depends on your finances. If you have a lot of equity in your home, a HELOC or home equity loan might be best. Or, you might use a cash-out refinance for home improvements if you can also lower your interest rate or shorten your current loan term. Those without equity or refinance options might use a personal loan or credit cards to fund home improvements instead.
That depends. We’d recommend looking at your options for a refinance or home equity-based loan before using a personal loan for home improvements. That’s because interest rates on personal loans are often much higher. But if you don’t have a lot of equity to borrow from, using a personal loan for home improvements might be the right move.
Credit score requirements depend on the loan type. An FHA 203(k) rehab loan can go as low as a 580 score under FHA rules, though many lenders look for a higher score on 203(k) loans. Cash-out refinancing typically requires at least a 620. For a HELOC or home equity loan, many lenders look for a score in the 680 to 700 range or higher. For a personal loan or credit card, lenders often prefer scores in the 700s. A higher credit score generally helps lower your rate.
If you’re buying a fixer-upper or renovating an older home, the best renovation loan might be the FHA 203(k) mortgage. The 203(k) rehab loan lets you finance (or refinance) the home and renovation costs into a single loan, so you avoid paying double closing costs and interest rates. If your home is newer or higher-value, the best renovation loan is often a cash-out refinance. This lets you tap the equity in your current home, and you could refinance into a lower mortgage rate at the same time.
Home improvement loans are generally not tax-deductible. However, if you finance your home improvement using a refinance or home equity loan, some of the costs might be tax-deductible.
It depends on the loan and your equity. An FHA 203(k) can finance up to 110% of the home’s after-improved value, with the Limited 203(k) capped at $75,000 in rehab costs. A conventional cash-out refinance is generally limited to 80% of your home’s value. Home equity loans, HELOCs, and personal loans have limits that vary by lender.
Disclaimer: The Mortgage Reports does not provide tax advice. Be sure to consult a tax professional for any questions about your taxes.
Shop around for your best home improvement loan
It pays to compare all your options, so don’t just settle on the first loan offer you find. Compare loan types, rates, and terms carefully to find the best loan for home improvements.
What experts are saying
Thomas Brock, CFA, CPA
“When it comes to home improvement loans, one thing I’ve seen is that the amount a lender is willing to provide can sometimes become the budget for the project. A homeowner may start with a $30,000 renovation in mind, discover they can access $50,000 of home equity, and suddenly begin considering upgrades they never planned to make. The financing transaction starts driving the project instead of the other way around.
Always strive to establish the project’s budget first. Then, pursue the financing option that provides the most economical way to fund that specific project without borrowing more than you need.”
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
By refinancing an existing loan, the total finance charges incurred may be higher over the life of the loan.
