Once you know what you want to remodel, the next question is how to pay for it. There’s no single right answer. The best choice depends on your budget, how much equity you have, and how quickly you want to start. This guide walks through the most common home remodel financing options for Maryland homeowners, so you can have an informed talk with your bank or financial advisor.
Note: We’re remodelers, not lenders or financial advisors. The information below is general and isn’t financial advice. Rates, terms, and programs change, so always check current details with a qualified lender before you decide.
1. Paying With Savings
Paying cash is the simplest option. There’s no interest, no loan application, and no lien on your home. On the downside, it can take longer to save, and it may leave you with less of a safety cushion. Many homeowners combine savings with another option, or split a large remodel into phases they can pay for over time.
2. Home Equity Line of Credit (HELOC)
A HELOC lets you borrow against the equity in your home, up to a set limit. You draw money as you need it and generally pay interest only on what you use. This flexibility works well for remodels, since payments to your contractor happen in stages. However, many HELOCs have variable rates, so your payment can change over time.
3. Home Equity Loan
A home equity loan also uses your equity, but you get the full amount up front, usually at a fixed rate with a fixed monthly payment. This option suits a project with a clear, set price, like a kitchen or bathroom remodel with a signed contract.
4. Cash-Out Refinance
With a cash-out refinance, you replace your current mortgage with a larger one and receive the difference in cash. It can make sense when current rates are similar to or lower than your existing mortgage rate. On the other hand, if your current rate is low, refinancing the whole balance may cost you more over time. Closing costs also apply.
5. Personal Loan
A personal loan doesn’t use your home as collateral, and approval can be fast. As a result, it can work for smaller projects or for homeowners without much equity yet. Interest rates are usually higher than home equity options, and loan terms are shorter.
6. Renovation Mortgages
If you’re buying a home that needs work, some mortgages let you roll the cost of renovations into the purchase loan. FHA 203(k) loans and certain conventional renovation loans are common examples. These loans have extra paperwork and contractor requirements, so start the conversation with your lender early.
Energy Rebates Can Lower Your Costs
If your remodel includes energy upgrades like insulation, air sealing, or a heat pump, your utility may offer rebates. Pepco and BGE customers can check the EmPOWER Maryland programs on their utility’s website. The Maryland Energy Administration also lists current incentives. For ideas, see our post on energy-efficient home remodel upgrades.
How Payments Work With a Maryland Contractor
No matter how you finance your project, Maryland law protects you. Under the Maryland Home Improvement Commission rules, a contractor can’t accept more than one-third of the contract price as a deposit, and can’t take any payment before the contract is signed. In addition, always confirm your contractor holds a valid MHIC license. Real Time Home Improvement is licensed under MHIC #162705.
Tips Before You Borrow
- Get a written estimate first. Lenders and your own budget both depend on a realistic number.
- Add a contingency. Plan for 10 to 20 percent extra, especially in older homes.
- Compare offers. Rates and fees vary between banks and credit unions.
- Match the loan to the project. Short projects may not need long-term debt.
- Think about value. Kitchens, bathrooms, and finished basements tend to add the most everyday use and appeal.
Start With a Free, Detailed Estimate
A clear estimate makes every financing conversation easier. At Real Time Home Improvement, we give free, itemized estimates for home remodeling in Montgomery County, including kitchens, bathrooms, and basements. We’ll also help you plan the project in phases if that works better for your budget.
Request your free estimate or call (240) 485-8797.