Can you use your home loan to renovate? 

John Merrill Homes custom kitchen design

So, you’ve found your dream home, but it needs a little extra TLC to truly shine. Or perhaps you’re already settled and have been there for years, but you’re itching to upgrade your space with that dream kitchen or luxurious bathroom you’ve always wanted. Whatever your vision, the question arises: Can you use your home loan to finance these renovations? The short answer: Yes, you can. But as with any financial decision, there are several factors to consider.

You may also be interested in: Is it better to renovate or build new? 

Why combine renovation costs with your mortgage?

Renovating your home can be a strategic investment, boosting its value and enhancing your quality of life. Whether you’re looking to increase your property’s marketability or simply create a more comfortable living space, financing renovations through your mortgage offers several advantages:

Boosting property value

Judicious home renovations can significantly increase your home’s market value. Projects that expand living spaces or enhance functionality and aesthetics can give you a competitive edge in the real estate market. 


In 2022, Today’s Homeowner interviewed 3,700 Americans about their renovation plans. Interior room remodels (70%), home system upgrades (63%), and outdoor upgrades (54%) were the most popular renovation projects done by homeowners in 2022. 

And here are some of the top interior design trends of 2024.

Simplified financing

Combining renovation costs with your mortgage streamlines the borrowing process, resulting in a single loan and monthly payment. Taking this approach can help you avoid additional closing costs associated with separate loans.

Lower interest rates

Mortgage loans typically offer lower interest rates compared to other financing options, like personal loans or credit cards. Lower rates translate to more affordable borrowing and manageable monthly payments.

Financing options available for incorporating renovation costs into your mortgage

Cash-out refinance

Cash-out refinancing involves refinancing your current mortgage and adding to the principal, allowing you to access some of your equity in cash. While this approach consolidates renovation costs into a single loan, it may not be the most suitable option for everyone since refinancing can result in higher interest rates and limit your borrowing capacity. Before proceeding with a cash-out refinance, carefully weigh the associated costs and consider alternative avenues for renovation financing.

Home equity

Borrowing against home equity presents another financing option for home renovations. Home equity loans and home equity lines of credit (HELOCs) allow you to tap into your home’s equity while offering several advantages:

  • Tax benefits: The interest on home equity loans and HELOCs may be tax-deductible if used for qualifying home improvements.
  • Flexible repayment: With home equity loans and HELOCs, you have the flexibility to choose the repayment term that best suits your financial needs.
  • Lower interest rates: Home equity loans and HELOCs typically offer lower interest rates than other financing options, making them a cost-effective choice for renovations.

Making informed decisions is the key to successful renovations

While using your home loan to renovate offers several benefits, it’s essential to assess your financial situation, explore your options thoroughly, consult with financial experts, and choose the approach that aligns with your financial goals and priorities. 

You may also be interested in: How to find the right contractor for your home renovation


Are you ready to turn your house into the home of your dreams?

We’re here to help you every step of the way with our free Home Renovation Checklist. 

Home Renovation Checklist

Remember, renovating your home is about investing in your future and creating a space that reflects your lifestyle and values. At John Merrill Homes, we make it our mission to work within your budget to create beautiful, functional spaces that generate a significant return on investment—financially, and by making your home even better to live in. Count on us to create a home that reflects your family’s unique needs, budget, style, and personality. Contact us today to schedule your free consultation.

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