5 options for financing home renovations if you live in San Francisco

UNITED STATES—Home renovations are exceptional projects that increase the value of your home and increase your quality of life. But these projects can also be expensive, especially in an area like San Francisco where real estate prices are incredibly high.

The good news is that you can make your home renovation easier if you plan ahead and find a suitable way to finance your project. Here are five financing options you want to consider if you have an upcoming home improvement project in San Francisco.

1. Credit cards

A credit card is probably the best option if you’re planning on doing minor renovations, like repainting your house or updating a bathroom. Even better, most credit cards offer no interest for the first few months, which means you can pay off your project without incurring additional debt.

However, there is a limit to the amount you can borrow with most credit cards. So, your credit card might not be an option to explore if you’re planning on doing a major renovation.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit works like a credit card. You can withdraw money from the line of credit at any time and use it to finance your home improvement.

The amount you can borrow under the HELOC depends on the equity in your home, which is calculated by subtracting the amount you owe on your mortgage from the current market value of your home.

For example, if the market value of your home is $800,000 and your mortgage balance is $600,000, you have $200,000 of equity. You can find detailed information on this page if you want to learn more about accessing your home equity.

HELOCs are ideal if you are planning a large home improvement project. They offer flexible repayment options for up to 30 years, depending on your loan amount.

3. Home Equity Loan

A home equity loan is another way to finance your home improvement project. Like a HELOC, the loan amount is determined by the equity in your home.

However, a home equity loan differs from a HELOC in that the lender pays you a lump sum which you pay in equal installments over a predetermined period. Its interest rate is also fixed for the duration of the loan.

A home equity loan can be a good financing option for medium to large projects that require a fixed amount of cash. But before applying, make sure you have an accurate estimate of your renovation costs.

4. Refinancing by withdrawal

A cash-out refinance involves replacing your existing mortgage with a new one that offers a higher loan amount and new interest. You can use the extra money to pay for your renovation project.

A withdrawal may be fine if you’re looking to finance your home improvement project but don’t want to replace your mortgage lender or deal with closing costs. You might want to consider it for small projects and emergency repairs.

However, keep in mind that these types of loans come with their own costs and fees that could push you further into debt. You may have to pay setup and appraisal fees and taxes, among other expenses. Your credit score must also be excellent to qualify for a cash refinance.

5. Registration

If you don’t want to have to take out a loan or line of credit, consider saving for your home improvement project. The easiest way to do this is to open a dedicated savings account, into which you can make monthly or weekly deposits to achieve your goal.

While this may be the safest way to finance your home improvement project, saving is also the slowest because it takes time to accumulate enough funds. Thus, it might not be suitable for large projects or urgent renovations.

Michael J. Birnbaum