How to Finance Your Renovations

Real Estate Agent with Keller Williams Realty 276530

If you have chosen to renovate your home then you know the price can easily exceed your predictions. Home renos tend to have what is known as "scope creep." This is when the renovations start and as they progress new things or problems cause there to be more work than originally predicted. This can be difficult to deal with is funding is limited so its a good idea to build contingencies into your financing plans right at the start. That way when the surprises pop up, you will be ready for them.

When thinking about renovation financing there are two likely candidates for you to consider. The home equity loan and the home owner's line of credit. The amount available for a home equity loan is based on the amount of equity that you have built up in your home. This loan is sometimes referred to as a second mortgage. It is calculated by taking the value of your home and subtracting the amount left outstanding on the original mortgage. If you own your home outright, then the amount would be the home's value. As an example, if you have a home that is worth $250,000 and you have already paid off $110,000 then your accumulated equity would be $140,000. The value of the property is what guarantees the loan so the interest rate is low as well as they payments. It is also normal to be able to secure fixed interest rates for such loans.

The other popular financing option is the home owner's line of credit. This loan does not have a finite amount save for the limit which is once again decided by your equity. This is a popular option as it allows for a lot of room when considering costs. The loan operates much like a credit card, with a variable interest rate. This is certainly the most flexible of the options and does not have a definite end date. The line of credit remains open for as long as you need it and do not close it out.

The best way to discern which type of loan is proper for your needs is to confer with a financial expert or banker. Prioritize your needs and try to find a loan that is tailor made for you. Remember that your home is going to be on the line as collateral so be sure to plan your payment schedule carefully and within what you can afford to pay. Make sure that you research all your options here and find what work s for you and for your budget.

Posted by

Stephanie Baubie
NC License #: 276530
Keller Williams Realty North
3150 N. Elm Street, Suite 101
Greensboro, NC 27408



Comments (23)

Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Stephanie, what a great first post!  Welcome to ActiveRain - we'll have you addicted in no time!

Feb 18, 2016 11:50 AM
Stephanie Baubie

Thanks Patricia!

Feb 18, 2016 10:04 PM
Compass - La Jolla, CA
San Diego Partner - The Private Client Network

Hi Stephanie thanks for sharing re: finance for renovations welcome to Active Rain.

Feb 18, 2016 12:40 PM
Stephanie Baubie

Thank you, Joy!

Feb 18, 2016 10:04 PM
Sharon Kowitz
Cary, NC Relocation Specialist ~ Buying or Selling

Welcome to Active Rain and Congratulations on your first blog post! This is great information and I look forward to reading more from you!

Feb 18, 2016 12:57 PM
Stephanie Baubie

Thank you, Sharon!

Feb 18, 2016 10:05 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA


welcome to our blogging community! I hope, being here will be beneficial for your business:) 

Feb 18, 2016 04:06 PM
Stephanie Baubie

Thank you, Inna! I hope being here will be beneficial as well. Looking forward to the connections I can make.

Feb 18, 2016 10:06 PM
Chrissi Chapman Topoleski
Coldwell Banker Realty - Woodbridge, VA
Passionate about helping others achieve success!

"Scope creep" is a great way to describe it! I know of someonewho renovated an older home, and everything they did uncovered other, huge problems with the house. Luckily, they had enough equity to finance it and have no plans to move.

Feb 18, 2016 08:03 PM
Stephanie Baubie

That's an awesome example of "scope creep" Chrissi! Fortunately, for your friends they had the funds to cover it all. All to often, many people find themselves in a jam because they don't plan well enough for the unknows that they uncover.

Feb 18, 2016 10:07 PM
Kat Palmiotti
406-270-3667,, Broker/REALTOR® - Kalispell, MT
Helping your Montana dreams take root

Welcome to ActiveRain! Loans are certainly an option for making upgrades. Thanks for sharing.

Feb 18, 2016 08:25 PM
Stephanie Baubie

Thanks Kat!

Feb 18, 2016 10:08 PM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Stephanie Baubie I love your first post.... great explanation of the two most popular methods of financing a home project.... and "scope creep" is a new one to me....I'll remember that term!!

Feb 18, 2016 08:38 PM
Stephanie Baubie

Thanks Barbara! "Scope creep" was actually a term I learned about in my life prior to real estate. I was a project manager for many years prior to entering the real estate world and that was a term we use when the projet we were working on began to "creep" from it's original parameters. :-)

Feb 18, 2016 10:10 PM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

and welcome to's a great place to learn, share, market and network....and I hope you enjoy all of it as much as I have..

Feb 18, 2016 08:39 PM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Welcome to Active Rain!  As REALTORS® who have been here for more than 9 years, it's well worth it!


Feb 18, 2016 09:08 PM
Stephanie Baubie

Thanks Tony & Suzanne! Good to hear that it's well worth it! Have a great day!

Feb 18, 2016 10:11 PM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

Hi Stephanie Baubie, Thanks for a great first blog post and good luck with your business.


Feb 19, 2016 12:24 AM
Stephanie Baubie

Thanks Sybill!

Feb 19, 2016 12:28 AM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

By the way, welcome to Active Rain and here are a few points to add to your total.

Feb 19, 2016 12:24 AM
Mery Fernandez Empire Network Realty Luxury Brokerage
Empire Network Realty INC. - Orlando, FL
The Rise of An Empire, Let's Build Yours!

Hi Stephanie! Welcome to the world of Activerain, may your blogging  create a whole new chapter in your Real Estate Career.

Feb 19, 2016 02:19 AM
Stephanie Baubie

Thanks Mery!

Feb 19, 2016 09:23 PM
Margaret Kapranos
Berkshire Hathaway Home Services - Novato, CA
San Francisco Bay Area REALTOR. 415-608-5070

Great content.  You sound like there's a contractor or banker lurking around somewhere in the background!  Best of luck utilizing ActiveRain.  From this post, you are sure to become a successful publisher.  

And of course, if you are ever in my neck of the woods, do a shout out!

Feb 19, 2016 07:03 AM
Stephanie Baubie

Thanks, Margaret, and I sure will. You do the same if you're in my neck of the woods as well!

Feb 19, 2016 09:24 PM
Robert May
Robert W May - Lethbridge Real Estate - Lethbridge, AB
Real estate consulting

Welcome to Activerain and congratulations on your first blog post here.  There is tons of great info to read and a community full of interesting and helpful people.  Feel free to come stop by my blog and leave a comment or say hello.

Feb 19, 2016 12:02 PM
Stephanie Baubie

Thanks Robert, and I'll be sure to check your blog out as well.

Feb 19, 2016 09:25 PM
Joan Dickie
Keller Williams Premier Realty - La Crosse, WI
Keller Williams Premier Realty

Welcome to Active Rain and congratulations on your first blog here.  If this is an example of your writing, I'm looking forward to reading more!

Feb 21, 2016 02:17 AM
Letitia Stevenson
BHHS Fox & Roach | - Greenville, DE
Listing Agent DE/PA/MD, Digital Marketer & Coach

Hi Stephanie, Thanks for sharing and welcome to the Rain! ActiveRain is a great place to share your knowledge, expertise and thoughts, as well as network and learn so much from the vast pool of talent already onboard. I look forward to reading your upcoming posts. If you would like to connect with me on ActiveRain, please subscribe to my blog! Welcome Aboard and Much Success! 

Feb 21, 2016 03:21 PM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Stephanie,
Great topic!  Welcome to the world of Active Rain blogging.  It is an extremely valuable platform to connect with other agents and potential clients.  I recommend you check out the "Resources" section and click on "Getting Started".

Feb 21, 2016 11:45 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Stephanie, great post for those homeowners wishing to upgrade/update their home versus moving!    Lots of valueable information!   Welcome to ActiveRain!  

Feb 22, 2016 01:35 AM
Robert May
Robert W May - Lethbridge Real Estate - Lethbridge, AB
Real estate consulting

Keep on adding more blog posts and article and you will soon find that it will attract readers, generate phone calls, and make money.  It is a slow and gradual process but works like magic.

Feb 22, 2016 02:59 AM
Bob Crane
Woodland Management Service / Woodland Real Estate, KW Diversified - Stevens Point, WI
Forestland Experts! 715-204-9671

Good advice Stephanie!

Welcome to Active Rain, looking forward to reading many more of your posts, let me know if there is anything that I can do to help as you get started here.

Feb 23, 2016 03:25 PM