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Instead of purchasing a new home, you may want to renovate your current home. Not only do improvements make a home more comfortable to live in, but upgrades may attract prospective buyers when it's time to sell the home. However, home improvements can be expensive and require upfront cash.

Luckily, there are some options that enable you to make those desired improvements on your home, including a Cash-Out Refinance and a Home Equity Line of Credit. Each of these options involve tapping into the equity that you have built up in your home, and each can be used to pay for improvements to your home. But the two options are not the same.

home improvement loan


Cash-Out Refinance

The first is Cash-Out Refinance. With a cash-out loan, you can tap directly into the equity that you’ve built up over time by refinancing your existing mortgage into a new one, possibly with different terms, for a dollar amount that is larger than what you owe on your current mortgage.
Your existing mortgage is paid off, along with any closing costs, and the remaining balance is paid out to you in cash at closing.
From there, you can use that money for home improvement projects, including:

  • Roofs, Gutters and Downspouts
  • Interior and Exterior Painting
  • Minor Kitchen and Bath Remodels
  • New Windows and Doors
  • Energy Efficient Improvements
  • Removal of Lead-Based Paint
  • Decks, Patios and Porches
  • Landscape Improvements
  • Basement Waterproofing
  • Washer and Dryer Upgrades

Depending on how much equity you have in your home, you may even be able to use the money for larger projects like a full kitchen remodel, the construction of a home office, adding an extra bedroom, and more.
The other option is a Home Equity Line of Credit, commonly known as a HELOC.


A HELOC is different from a Cash-Out loan in that the money isn’t provided to you in a lump sum. With a HELOC, the homeowner has access to a line of credit that they can utilize when they need it.

A HELOC loan allows you to borrow against your home’s equity with an additional loan that functions somewhat like a credit card. You can take money (or “draw”) from your line of credit to pay for various home improvements and other projects.

You will have to pay back what you draw with interest, like a credit card, but you are able to withdraw as much as you need in separate withdrawals.

A HELOC requires an additional payment beyond your original mortgage and carries an adjustable interest rate, which means that if interest rates increase, your HELOC payment could increase.

HELOCs have a period of time when you can withdraw money and period of time when you repay what you owe. Draw periods are typically 10 years, while the repayment period is often 20 years.

As with a Cash-Out loan, HELOC funds can be used for home improvements projects like a new kitchen, bathroom, patio, deck, home gym, pool, and more.

To learn more about Cash-Out loans  or HELOCs for your home improvement projects, you can use the refinance mortgage calculator, or speak to an experienced mortgage specialist.

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