You could pay cash for the improvements if you have the money in a checking or savings account. There are two drawbacks to consider before you go this route.

  • Savings Depletion: a large project could quickly deplete your savings. Think about this in the context of the next 3-5 years. What other large expenses do you expect, and would it be useful to keep your savings on hand?
  • Opportunity Cost: if a home improvement loan costs less than what you’re earning in your investment accounts, you may be better off investing your money instead of paying cash for the improvements. For example, would it be more useful to invest that money in a college savings plan for your kids or grandkids, or perhaps contribute more funds to your retirement account? Talk to your financial advisor for more details.


Some credit cards have very low introductory interest rates that last for a certain period of time. You could potentially tap into those offers if you’re confident that you can pay off the card(s) before the introductory period expires. The drawback with this option is that life happens, and you may not be able to pay off the card quickly as you initially thought. In that case, your interest rate could quickly skyrocket.


A home equity loan or line of credit is basically a “second mortgage” that you take on the house. You would leave your current mortgage as is, and you would add a second mortgage with its own set of interest rates, payments, and terms. The main drawback with this option is that interest rates and monthly payments are typically higher than first mortgages, especially now that the Fed has started increasing interest rates.


You may be able to take out a larger mortgage and receive some extra cash at the closing. House prices have improved considerably, so many homeowners have enough equity in their homes to do this. Also, interest rates are still very attractive. The main drawback with this option is that you may have closing costs and/or a higher interest rate with the new mortgage. In any case, it’s probably worth exploring.

RULE OF THUMB: Make sure to keep your home improvement receipts for tax purposes!

Ready to get started? Reach out today! We’re here to help!

Tim Erickson
P: (652) 451-2273
E: tim.erickson@goluminate.com
W: www.TimEricksonMortgage.com

Mark Henderson
P: (651) 398-3477
E: mark.henderson@goluminate.com
W: www.MarkHendersonMortgage.com