How Smart Money Pays For Home Improvements

Ready to turn your house into your dream home? Before building a new bathroom or updating your aging electrical work, explore your options for financing.

Depending on the size of a home improvement project, many homeowners assume their credit card is a good option for accessing cash fast. Think again, because financing home projects on your plastic can come with some dream-crushing drawbacks.

3 ways Home Equity loans have the edge over credit cards for home improvements...

1. Lower interest rate

Homeowners can typically expect a lower fixed interest rate. Lower than what? For starters, lower than an unsecured personal loan. But what about a credit card?

Homeowners can almost certainly get a lower rate with a home equity loan than many credit card interest rates (the Fed reported in 2022 that the average credit card APR is 16.6%).

In fact, using a credit card can do more damage than adding significant costs to a project over time in interest. Financing home improvement costs with a credit card can potentially harm your credit score.

How? Carrying too high a balance on your card can decrease your score—and make it more expensive to borrow in the future for anything from education to cars to everything in between.

2. Better payback period

Sure, you may want to take advantage of low interest rates on a balance transfer credit card, but what happens when the 12-18 month promotional period is over?

Unless you can afford to pay off your debt within the promotional time frame, it’s not worth it.

Home Equity loans can offer terms up to 30 years, lowering monthly payments so it's easier to pay over time.

3. Potential tax breaks

Using a Home Equity loan to spruce up your house could work in your favor come tax season as well. While many home improvement projects are not tax deductible, the interest you pay on your home equity loan is.

Be sure you're clear on the limits and requirements involved before making substantial improvements to your home.

Here’s a short list of home improvement options to research for potential tax breaks:

• Energy-efficient home improvements

• Medical care home improvements

• Home improvements meant to increase resell value

• Home office improvements for home businesses

Interested in another way to access cash for your dream home updates? Spring EQ allows homeowners to access cash up to 95% of their home's equity. If you're interested, take a moment to let us know and we'll reach out to help you explore your options.

And if you want to take a moment to get an instant estimate on how much available equity your home can offer, use our equity estimator tool.