Remodeling Your Home: Financing Options to Consider for a Major Renovation

Recently, I spoke with a Seattle homeowner who is planning a major remodel. Like many homeowners, he initially reached out asking about a HELOC — which is often the first option people think of when they want to improve their home. They currently have a very low rate with their existing mortgage, which is one reason why they’re considering a home equity line of credit.

As we talked through his plans, budget, and long-term goals, it became clear that there were several ways to approach financing a remodel, each with very different advantages and limitations.

If you’re considering remodeling your home — whether it’s a kitchen overhaul, an addition, or a full transformation — understanding these options upfront can help you choose the strategy that fits your project best.

Start With the Vision: What Kind of Remodel Are You Planning?

Before choosing how to finance a remodel, it’s important to ask a few questions:

• Is this a cosmetic update or a major renovation?
• Are you remodeling in phases or all at once?
• How much flexibility do you need with the funds?
• Do you want to base financing on your home’s current value or its future, improved value?

Your answers will often point you toward the right loan option.

Option 1: HELOC (Home Equity Line of Credit)

A HELOC is a popular option for homeowners who want flexibility.

How it works:

• Based on your home’s current value
• Subject to lender loan-to-value limits, which are often more conservative
• Funds are accessed as needed, similar to a credit line

Pros:

• Flexibility in how and when funds are used
• Interest is paid only on what you draw
• Good for phased or smaller projects

Limitations:

• Total available funds may be limited
• Not ideal for large-scale remodels
• Loan amount does not consider the home’s future value

A HELOC can be a great tool, but for major remodels in high-cost areas like Seattle, the available funds sometimes fall short of what the project requires.

Explore HELOC (home equity lines of credit) options.

Option 2: Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a new, larger loan and provides cash at closing for your remodel.

How it works:

• Typically based on up to 80% of the home’s current value
• One loan, one monthly payment
• Cash can be used flexibly for remodeling or other needs

Pros:

• Fixed interest rate options
• More flexibility with use of funds

Limitations:

• Still capped by the home’s current value
• May increase your overall mortgage balance
• Replaces your existing mortgage rate

Cash-out refinances can make sense when homeowners have significant equity and want predictable payments, but they still don’t account for the value the remodel itself will create.

Learn more about cash-out refinances for Pacific Northwest homeowners.

Option 3: Renovation Mortgage (Based on After-Improved Value)

For homeowners planning a major remodel, a renovation mortgage can provide the most funding potential.

How it works:

• Loan amount is based on the home’s after-improved value
• Financing includes both the existing mortgage balance and renovation costs
• Funds are released in stages as work is completed

Pros:

• Access to more funds for large projects
• Financing reflects the home’s future value
• Ideal for major remodels or structural changes

Considerations:

• The lender is more involved in the process
• Draws are managed and inspected
• More documentation and planning upfront

Renovation mortgages require a bit more coordination, but for homeowners taking on a substantial remodel, they often provide the best alignment between project scope and financing.

Here are some renovation mortgage options for homeowners in Washington state.

Option 4: Reverse Mortgage for Homeowners

For homeowners 62 or older, a reverse mortgage can also be a powerful option when planning home improvements — especially for those who want to age in place comfortably and safely.

How it works:

• Available to homeowners age 62 and older
• Based on the homeowner’s age, home value, and equity
• Funds can be accessed as a lump sum, line of credit, or monthly payments
• No required monthly mortgage payment (as long as loan obligations are met)
• HELOC Reverse mortgages are also available!

How reverse mortgages can be used for remodeling:

Reverse mortgage proceeds can be used to fund improvements such as:

• Accessibility upgrades (ramps, wider doorways, walk-in showers)
• Kitchen or bathroom remodels
• Main-floor living conversions
• Energy-efficiency improvements
• General repairs and updates that make the home safer and more comfortable

Why this can be a good fit:

• Allows homeowners to tap into equity without taking on a new monthly mortgage payment
• Provides flexibility in how funds are used
• Supports long-term plans to remain in the home rather than move

Important considerations:

• The loan balance increases over time
• Ongoing obligations (property taxes, insurance, maintenance) still apply
• Works best when aligned with long-term housing and estate goals

For many homeowners, a reverse mortgage can be a thoughtful way to invest in their home, quality of life, and independence, while preserving monthly cash flow.

Learn more about how a reverse mortgage may be an option for you or someone you know.

Choosing the Right Strategy

There’s no one-size-fits-all answer. The right choice depends on:

• The size of your remodel
• Your current mortgage and equity
• How involved you want the lender to be
• Your long-term plans for the home

That’s why I encourage homeowners to explore all options before committing to one.

Final Thoughts

Remodeling your home can be an exciting opportunity to improve how you live, add long-term value, and make your home truly fit your needs. The financing strategy you choose can have just as much impact as the design itself.

If you’re considering a remodel — whether in Seattle or anywhere in Washington — I’m happy to help you review your options and run scenarios so you can move forward with confidence. Let’s talk!