Personal Finance

I want to do a major renovation costing over $100k - what's the best way to financially pay for that?

Christy Bieber

Published: February 23, 2025 9:12 am

Renovating your house can make your home more comfortable and more livable and it can increase the value of your home. Unfortunately, it can also be really expensive. One Reddit user is dealing with a costly renovation now, with the original poster (OP) stating that he is considering spending $100K on home upgrades. 

If you are thinking about an expensive remodel like this, there are multiple potential ways to pay for it. It’s up to you to select the best one, but here are a few options worth considering.

Pay for the renovation with savings

One of the best ways is to just save up for the renovation. This can be your best option for a few reasons, including the following:

• You will build equity in the home by improving its value without borrowing more
• You won’t have to apply and get approved for a loan
• You will not have to pay interest

The Reddit user is considering this approach, as he said he has enough cash in a high-yield savings account to fund the purchase. However, he also said that the money he is thinking about using is in his emergency fund. If that’s the case, that’s not ideal because he could leave himself vulnerable to going into debt if an emergency does happen. It would be better to save a dedicated home repair fund that’s specifically for the renovation and leave his emergency savings alone. 

That said, raiding the emergency fund can still sometimes be better than borrowing since you do avoid interest costs. And it may be foolish to borrow for a renovation just to avoid the risk of having to borrow later on if an emergency does occur. If the Reddit user takes this approach, though, building the emergency fund back up should be the top priority. 

Use a home equity loan

Home equity loans can also be a good option under some circumstances. Although rates are relatively high on home equity loans right now, they are likely lower than the rates that could be found using other methods of borrowing. In some cases, interest costs on home equity loans are also tax-deductible for itemizers — including when loan proceeds are used to buy, build, or substantially improve the home that’s acting as collateral. 

The Redditor would need to qualify for a home equity loan, though, which would mean they would need enough equity in the home to borrow against as well as good credit. There are closing costs associated with home equity loans, though, and the process can take a while so this may not be ideal for everyone.  Plus, you are putting your home at risk so you must make sure you can pay the bills. 

Borrow with a personal loan 

Taking out a personal loan could be another option for those looking to borrow to pay for renovations. Personal loans usually don’t require collateral, unlike home equity loans that are guaranteed by the house. If you take out a personal loan, you take less risk of your house being foreclosed on if you can’t pay. It’s also usually easier and cheaper to qualify for a home equity loan in terms of upfront fees since you don’t need an appraisal or title insurance like you would for a home equity loan.

The interest rates are high on these loans, though, and you should not take out a personal loan unless you fully understand how it works and can ensure the payments are affordable. 

Ultimately, the right choice is going to depend on your specific situation. For example, if you are paying cash and a contractor allows you to, you should charge your renovation on a credit card to get points and then pay off the bill in full. This could effectively reduce the cost of your renovation thanks to the credit card points. However, not all contractors allow you to pay with cars because of the fees charged.

You should also strongly consider working with a financial advisor to understand the total costs of the remodel and to decide the best way to pay for it given your financial situation. Do this before you start the remodeling process so you aren’t left with a beautiful home but a pile of financial regrets.