Home renovation could peak in 2022. Here’s how to finance the improvements

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Many people have been spending more time at home since the start of the pandemic. And it inspired many people to update their homes.

If you’re thinking of renovating this year, you’re in good company. Home renovation is expected to take off in 2022, according to Harvard University’s Joint Center for Housing Studies. In fact, homeowners’ annual spending on improvements and repairs could reach $430 billion by the second half of the year.

If renovating your home is high on your priority list, there may be one thing holding you back: money. Looting your savings to pay for home renovations is not a good idea if it leaves you with limited cash reserves for emergencies. That’s why it’s worth looking into these affordable remodeling financing options.

1. Personal loans

Personal loans allow you to borrow money for any purpose, and you can take out one to finance home renovations. To qualify for a competitive rate on a personal loan, you will need strong credit. This is because personal loans are unsecured, so they are not tied to any specific asset. So lenders are already taking the risk of not getting paid, but the higher your credit score, the less risk there is.

2. Home equity loans

With a home equity loan, you borrow a lump sum of money and pay it back over time, just like you would with a personal loan. Home equity loans are secured by the properties in which the equity is borrowed. It can be a good thing and a bad thing.

The upside is that it’s fairly easy to qualify for a home equity loan as long as that equity is there. And your credit score might not be as big an issue when it comes to getting a home equity loan. But if you fall behind on your loan payments, you risk losing your home.

That said, you might get a lower interest rate on a home equity loan than a personal loan. This, in turn, could make you less likely to fall behind on your payments.


With a HELOC, or home equity line of credit, you have access to a line of credit that you can draw on for a set period of time, usually five to 10 years. HELOCs are more flexible than home equity loans because you don’t have to commit to borrowing a lump sum. This is often a good option for financing home renovations, as sometimes you may start a project only to meet additional costs as you go along.

Like home equity loans, HELOCs are secured by borrowed homes. They may be more affordable than personal loans from an interest rate perspective, but they also tend to come with variable interest rates, which means your HELOC payments could increase over time.

4. Refinancing by collection

With a cash refinance, you borrow more than your remaining mortgage balance and get the difference in cash. Even though mortgage rates have climbed recently, you’re still likely to pay less interest on the money you borrow with a cash refinance than with a personal loan, home equity loan, or HELOC.

That said, a cash-out refinance requires you to get a brand new mortgage, and it can be a lengthy process. Additionally, you will be charged closing costs to refinance your home loan, and these could be significant.

How will you pay for the renovations?

If you’re eager to upgrade your home, be sure to consider the pros and cons of your various borrowing options before moving forward. Remodeling can be rewarding, but it’s worth doing your best to make it as affordable as possible.

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