7 Creative Ways to Fund Your Next Big Home Improvement Project

A big home improvement project can have an equally big impact on your life and the value of your home. But there’s always the money hurdle: funding a renovation (especially a big one, like a new roof, a landscaping makeover, or a new kitchen) can feel close to impossible, especially if you’re a new homeowner.

Here are seven options you may not have considered for funding your next home improvement project, so you can get past your budgetary challenges and start getting your hands dirty.

Section 504 Home Repair Program

The Section 504 Home Repair Program is a federal initiative to help low-income and elderly individuals and families make improvements to their homes. To qualify, your income has to be below 50 percent of your area’s median income. You have to be living in (and fixing up) your primary residence. You also have to show that you don’t qualify for affordable credit elsewhere.

If this sounds like you, you may be able to get a 504 loan of up to $20,000. In addition, the 504 program provides grants of up to $7,500 for those 62 and older. To check if you qualify, choose your state from the USDA website and call your area’s 504 specialist.

HELOC

If you’ve been living in your home long enough to have built up some equity, a home equity line of credit (HELOC) may be the ticket to fixing your fixer-upper. A HELOC works exactly like a credit card: it’s a revolving line of credit that you can use for multiple projects, if you’d like.

Unlike an unsecured credit card, however, a HELOC is backed by your home equity -- so if you don’t make your scheduled payments, your lender can potentially start the foreclosure process. However, many homeowners use the HELOC responsible as a jumping-off point for funding important home improvement projects.

Home Equity Loan

A home equity loan, like a HELOC, is secured by your home’s equity. The main difference between these two options is that the home equity loan is a one-time, lump-sum loan (much like your initial mortgage). For this reason, home equity loans are great for big purchases -- many homeowners use them for their kids’ college tuition or to pay off medical bills. However, it can also be a smart move to use a home equity loan for a home improvement project, since you’ll ideally be pouring even more equity into your home after the project’s completion.

Home Improvement Store Credit Cards

Big-box home improvement stores like Lowes, Menards, and Home Depot offer credit cards that often pay you back in points or discounts on home improvement items. Your local home improvement stores might also be worth looking into for similar deals -- even if they don’t offer a big line of credit, they may still provide valuable discounts on the materials you’ll need for your project.

Personal Loans and Credit Cards

If you’re in a good spot financially (i.e., you have a low debt-to-credit ratio and the means to take on another monthly expense) a personal loan or credit card may be all you need to get the budget required for your big renovation project.

If you do go this route, take plenty of time to shop around, especially if you’re hoping to borrow a large amount. Just like with mortgages, unsecured loans and credit cards come with different rates and fees, and a little extra preparation now could save you thousands down the road.

203(k) Rehabilitation Mortgage Insurance

If you’re still house hunting for a fixer-upper, the 203(k) program makes it possible to roll an additional $35,000 into your primary mortgage for home improvement projects. This option is great if you have your eye on a home that’s not quite move-in ready, but could be dramatically improved with a few major renovations. Use it on everything from a bathroom remodel to replacing flooring.

Local and Demographic-Based Programs

Local governments sometimes offer unique loans or grants that you won’t find elsewhere. Depending on where you live, you might find assistance for specific demographic groups like veterans, seniors, minorities, or first-time homebuyers, too. Some states even offer loans and grants specifically for energy-efficient improvements. Start with a state search on USA.gov to find local government officials who can answer your questions about community-based home improvement grants.