Home renovations rarely happen on a whim. Somewhere between the peeling paint, aging appliances, and drafty windows — not to mention a growing family — many homeowners start asking the same question: How do you pay for remodeling without draining your savings or maxing out a credit card?
For many, the answer is a HELOC, a home equity line of credit that uses your home’s equity to fund the project ahead of you.
This article covers how a HELOC works, how homeowners use this resource for real renovations, and what to consider before you apply.
Financing a renovation isn’t one-size-fits-all — it depends on the project’s size, timeline, and how predictable the costs are.
Cash keeps things simple, but few homeowners want to drain their savings for a five-figure remodel. Credit cards are convenient, but the average card now carries an interest rate around 21 percent, according to Federal Reserve data, making them an expensive way to fund a multi-month project. Personal loans land in between: fixed payments, but usually a higher rate than anything backed by your home.
That’s where home equity financing tends to stand out. A home equity loan gives you a lump sum at a fixed rate, useful when you know the total cost upfront. A HELOC works more like a credit line: You draw what you need, when you need it, and pay interest only on what you’ve borrowed. For a renovation with phases or a shifting budget, that flexibility can be a big benefit.
There’s also a tax angle worth knowing. Per IRS guidance, interest on a HELOC may be deductible when funds go toward substantially improving the home that secures the loan, and renovation spending typically qualifies. Talk with a tax professional for clear guidance.
A HELOC is a revolving line of credit secured by your home’s equity, the portion of your home’s value you actually own outright. Most HELOCs work in two stages.
During the draw period, typically around 10 years, you can borrow against your credit line as needed, usually making interest-only payments unless you choose to pay down principal too.
Once the draw period ends, you enter the repayment period, when you can no longer pull new funds and instead pay back what you owe, plus interest, typically over 10 to 20 years.
Lenders generally cap borrowing at a combined loan-to-value ratio, often 80 to 85 percent of your home’s value across your mortgage and HELOC together. That structure is exactly why a HELOC suits renovations: You can draw funds in stages as a project moves from demo to finishes, instead of borrowing the full amount on day one.
Renovation costs vary widely by project and region, but a few real numbers help put a HELOC’s flexibility into perspective.
A Kitchen RemodelPicture an island for Sunday pancakes, cabinets that actually fit everything, and counters that people gather around. A full kitchen remodel typically runs $25,000 to $40,000, according to the national average.
Heated floors on a cold morning, a walk-in, rainfall shower, a vanity with room for two — a bathroom refresh is one of the most requested upgrades for a reason. Expect to spend around $15,600 on average nationally, typically ranging from $12,700 to $24,700 depending on size and finishes.
Imagine a new deck built for long summer evenings or relaxing in a hot tub while the grill is cooking up something tasty for the family. A new deck or patio averages $1,900 to $11,220 nationally, while adding a hot tub typically runs $2,000 to $11,000.
Not every renovation is a want. Sometimes it’s a need, and a solid roof protects everything else you’ve built underneath it. Roof costs vary by size, material, and region, but national data puts asphalt shingle replacement around $5,900 to $20,000 or more, averaging near $9,600.
Larger projects, say a home office and new floors this year and a primary bathroom or finished basement next year, are where a HELOC’s draw period earns its keep.
Instead of taking out a new loan for each phase, homeowners can draw against the same line of credit as each project comes up, paying interest only on the balance they’ve used.
Before you draw on a HELOC, it’s worth pausing on two questions.
Will this project add value to your home? Renovations vary widely in what they return. A quick conversation with a local real estate agent can help you gauge what buyers in your area really want and what you should prioritize.
Have you built a budget and a repayment plan? Renovation costs and timelines have a way of running past the original estimate, so know your comfortable monthly payment before you start drawing funds, not after the invoices arrive.
1st Ed Credit Union has served south-central Pennsylvania since 1938, with branches in Greencastle, Chambersburg, and Hanover. That local footprint matters when it comes to your HELOC: People who understand the area make the decisions, not a call center reading from a script.
As a member-owned credit union, 1st Ed keeps HELOC terms straightforward: a competitive rate, clear terms, and no hidden fees.
Whether you’re planning an outdoor kitchen this summer or budgeting for a new indoor entertainment area next year, a local team can walk you through what your home’s equity can do for your project.
Most lenders want you to retain at least 15 to 20 percent equity in your home after borrowing, which means your mortgage balance plus your HELOC together shouldn’t exceed roughly 80 to 85 percent of your home’s value.
The 30% rule is a budgeting guideline suggesting your total renovation spending should stay under roughly 30 percent of your home’s current value, so you don’t over-improve relative to your neighborhood. It’s a useful gut check, not a hard limit.
It can be if the funds go toward buying, building, or substantially improving the home that’s securing the loan. Interest on funds you use for unrelated expenses, like paying off a credit card, doesn’t qualify. Talk with a tax professional about your specific situation.
Yes, but joining is simple and straightforward. You typically qualify based on where you live, work, or attend school within the credit union’s service area, so most south-central Pennsylvania homeowners have a path to membership.
1st Ed Credit Union has branches in Greencastle, Chambersburg, and Hanover, Pennsylvania, serving homeowners throughout south-central Pennsylvania. We also offer 24/7 mobile banking and online banking services so you can bank anywhere, anytime.
Your home’s equity could be exactly what your next project needs. Learn more about mortgages and HELOCs at 1st Ed Credit Union, or stop by your nearest branch to talk it through with a local team.
Explore HELOCs at 1st Ed1st Ed Credit Union provides links to web sites of other organizations in order to provide visitors with certain information. A link does not constitute an endorsement of content, viewpoint, policies, products or services of that web site. Once you link to another web site not maintained by 1st Ed Credit Union, you are subject to the terms and conditions of that web site, including but not limited to its privacy policy.
Click the link above to continue or CANCEL