How to Use Home Equity to Fund Your Summer Home Projects

Summer has a way of bringing your home project list front and center:

• The kitchen that’s been “due for an update” since last fall
• The deck that didn’t make the budget cut last year
• The bathroom that’s functional, but very outdated

All kinds of projects start competing for your attention. For many homeowners, the hold-up isn’t motivation. It’s figuring out how to pay for it without draining savings or taking on high-interest debt. That’s where home equity can potentially open some doors—or maybe even help you replace a few.

If you’ve owned your home for a few years and have been consistently making mortgage payments, there’s a chance you’ve built up equity. That equity can potentially be put to work. Here’s a look at how home equity financing works, what your main options are, and what to consider before moving forward.

First, Home Equity 101

Home equity is the portion of your home’s value that you actually own. In simple terms, it’s the difference between what your home is currently worth and what you still owe on your mortgage.

For example, if your home is valued at $350,000 and you have $200,000 remaining on your mortgage, you would have approximately $150,000 in equity.

Equity grows in two main ways: as you pay down your mortgage principal over time, and as your home’s market value increases. The longer you’ve owned your home and made payments, the more equity you may have accumulated.

Two Common Ways to Access Home Equity

When homeowners want to tap into their equity for home improvements, there are generally two financing options to look into: a home equity loan and a home equity line of credit (HELOC).

They share a common foundation, in that your home serves as collateral, but they work quite differently.

Home Equity Loan

A home equity loan lets you borrow a lump sum against your equity, which you would repay in monthly installments over a set term. The interest rate is usually fixed, which means your payment stays the same throughout the life of the loan.

This option tends to work well for homeowners who have a defined project with a clear price tag, like a full kitchen remodel, a roof replacement, or an addition, and want predictable monthly payments.

Home Equity Line of Credit (HELOC)

A HELOC works more like a credit card backed by your home equity. Instead of a lump sum, you’re approved for a line of credit up to a certain amount, and you draw from it as needed during what’s called the draw period. During this time, you’re typically only required to pay interest on what you’ve borrowed.

After the draw period ends, the repayment period begins, and you pay back both principal and interest. HELOCs often carry variable interest rates, which means your payments can fluctuate over time.

HELOCs can be a good fit for projects that unfold in phases or when costs are harder to pin down upfront, like a multi-room renovation or a series of smaller upgrades over time.

What to Think About Before You Borrow

Using home equity for home improvements this summer might be a good option for you, but like any major decision, it deserves careful consideration. Here are some questions worth thinking through:

• How much equity do you have? Most lenders allow you to borrow up to a certain percentage of your home’s value, minus what you owe. Understanding your equity position is the starting point.
• What’s your credit profile? Your credit score, income, and overall financial picture play a role in what terms you may qualify for. Speaking with a banker early in the process can help you understand where you stand.
• How defined is your project scope? A clear, well-budgeted project may align better with a home equity loan. A more open-ended renovation may be a better fit for a HELOC’s draw as needed during the draw period structure.
• Are you comfortable with your home as collateral? Because your home secures the loan, it’s important to borrow only what you can realistically repay. Missing payments can have serious consequences, including foreclosure.
• What are the costs involved? Home equity financing typically comes with closing costs and fees. Factor these into your overall project budget, so there are fewer surprises.

How Home Equity Financing Compares to Other Options

Not every home improvement project needs to be funded through equity. Personal loans and credit cards are other avenues homeowners sometimes consider. Here’s a general sense of how they differ.

Because home equity loans and HELOCs are secured by your property, they often carry lower interest rates than unsecured options like personal loans or credit cards. That said, they also tend to come with more steps, including an appraisal, underwriting, and closing.

For smaller projects, say, a bathroom refresh or a new HVAC unit, a personal loan may be more efficient, and you can avoid putting your home on the line. For larger, equity-backed renovations, the potential for lower borrowing costs may make home equity financing worth the additional steps.

There’s no one-size-fits-all answer. The right choice depends on your project size, your timeline, your equity position, and your overall goals. A conversation with a banker can help you think through which path makes sense for your situation.

Key Takeaways

• Home equity is the difference between your home’s current market value and what you still owe on your mortgage. It can grow as you pay down your loan and as property values rise.
• Two main options exist for accessing home equity: a home equity loan (lump sum, fixed rate) and a HELOC (revolving credit line, typically variable rate).
• Your credit profile, equity amount, and project scope all factor into what financing options may be available to you and on what terms.
• Because your home serves as collateral, it’s important to borrow responsibly and only take on what you can realistically manage.
• Home equity financing isn’t the only option, but for larger projects, the potentially lower borrowing costs may make it worth exploring.

Final Thoughts

Home improvement projects have a way of sitting on the backburner until the right moment, or until they just can’t wait any longer. For many homeowners, understanding their financing options is what finally moves things forward.

Using your home equity to fund renovations isn’t a decision to make lightly, but it’s one worth understanding. When approached thoughtfully, it can be a way to invest in the place you already call home without waiting for the “perfect” time that may never come.

However you choose to finance your summer home improvement projects, we wish you the best of luck as you tackle them this year.