This blog is for educational purposes only, not an offer of credit or advertisement for current loan terms. It does not provide legal advice. Refer to our loan web pages or consult professional advisors for specific information.
Kitchen renovations are among homeowners' most sought-after upgrades but also among the most expensive ones.
In 2021, kitchen renovations were the most popular upgrade and accounted for the highest budget, averaging around $15,000. This is not surprising since renovating a kitchen can significantly enhance your home's value, functionality, and enjoyment.
If you're considering a kitchen remodel, one effective way to finance it is to tap into your home equity.
This article will explain how you can use your home equity to renovate your kitchen, the steps involved, and the benefits of choosing this financing option.
Start your application with MIDFLORIDA Credit Union.
Can I use my home equity to renovate my kitchen?
Yes—you can use your home equity to finance a kitchen renovation.
"Home equity" refers to the difference between the market value of your home and your mortgage's outstanding balance.
By borrowing against this equity, you can obtain the funds you need for your kitchen remodel.
How do I use my home equity to renovate my kitchen?
There are several ways to use your home equity for a kitchen renovation.
The most common options include:
- A Home Equity Loan
- A home equity line of credit or HELOC
- A cash-out refinance
Home Equity Loan
Home Equity Loans allow borrowers to access the equity they've invested in their homes as a lump sum.
This type of loan typically has a fixed interest rate and fixed monthly payments, making it a predictable and stable financing option.
Steps to obtain a Home Equity Loan:
- How much equity do you have? You can check this by taking the current market value of your property and subtracting how much you still owe on the mortgage.
- What's your credit score? A higher credit score often equals more competitive interest rates and terms for a better Home Equity Loan.
- Apply for the loan: Submit your application with the required documentation, such as proof of income, credit history, and information about your current mortgage.
- Receive the funds: Assuming you’re approved, you will receive a lump sum that may be used to pay for your kitchen renovation.
Home equity line of credit or HELOC
HELOCs are revolving lines of credit that allow you to borrow against your home equity as needed, up to a predetermined limit.
They differ from Home Equity Loans because they generally have variable interest rates and flexible repayment terms.
Steps to obtain a HELOC:
- Assess your equity: Same as above—subtract what you still owe from the current value of your home.
- Check your credit score: Those with better credit scores will almost always get better loan terms and rates.
- Compare lenders: Evaluate offers from various lenders, including MIDFLORIDA, to find the best HELOC terms and rates.
- Apply for the HELOC: Submit your application and provide the necessary documentation, such as proof of income and credit history.
- Access the funds: If approved, you can draw on the line of credit as needed for your kitchen renovation, only paying interest on the amount you use.
Cash-out refinance
A cash-out refinance involves refinancing your existing mortgage for a greater amount than you currently owe and taking the difference in cash. This lump sum can be put toward your kitchen remodel.
Steps to obtain a cash-out refinance:
- Assess your equity: Take away how much you owe on your mortgage from today's home value.
- Check your credit score—see if there's any room for improvement.
- Compare lenders: Check out different lenders and compare offers to find the best refinance terms and rates. MIDFLORIDA, for example, offers personalized service and competitive rates for cash-out refinance.
- Apply for the refinance: Submit your application with the required documentation, such as proof of income, credit history, and information about your current mortgage.
- Receive the funds: After approval, you'll receive a lump sum of cash for your kitchen renovation.
Benefits of using home equity for a kitchen remodel
Lower interest rates
Due to the collateralizing of your home, you'll often find lower interest rates with Home Equity Loans and HELOCs than with personal loans or credit cards.
Borrowing at lower rates makes the loan more affordable and reduces your overall cost of financing.
Potential tax benefits
The interest you pay on Home Equity Loans and HELOCs might be tax-deductible if the funds are used for home improvements1.
Consult with a tax advisor to understand the potential tax benefits in your specific situation.
Increased home value
Not only can investing in a kitchen remodel significantly increase the value of your home, but an NAR report also showed an average of 67-75% recovery of kitchen remodel cost.
Using your home equity to finance the renovation, you can enhance your home's functionality and appeal, yielding a higher price when you decide to sell.
Flexible financing options
Using home equity provides flexible financing options. You can choose between a lump sum with a Home Equity Loan, a revolving line of credit with a HELOC, or a cash-out refinance.
This flexibility can help you tailor your financing to meet your needs and budget.
Put your home equity to work in a kitchen remodel
By understanding how to leverage your home equity for a kitchen remodel, you can better decide the best financing option for your needs.
Whether choosing a Home Equity Loan, a HELOC, or a cash-out refinance, home equity can provide the funds you need to transform your kitchen into a functional and beautiful space.
If you're ready to use your home equity to renovate your kitchen, MIDFLORIDA can help.
With competitive rates, flexible terms, and outstanding customer service, our team knows how to guide you through the process and help you find the best renovation financing solution for your needs.
Start your home equity application with MIDFLORIDA
Start your application with MIDFLORIDA today—take the first step toward creating the new kitchen of your dreams.
Our team is here to support you and to help start you on the path to a smooth and successful renovation project.
