Renovation HELOC
Tap equity based on your after‑improved value — fund the renovation that makes your home worth more.
Overview
A Renovation HELOC (Home Equity Line of Credit) lets homeowners borrow against the post‑renovation value of their property instead of the current, as‑is value. That difference makes all the difference: by using an appraisal that projects what your home will be worth when the improvements are complete, a Renovation HELOC often unlocks substantially more credit than a standard HELOC. That extra borrowing power helps homeowners complete meaningful remodels, large additions, or value‑adding upgrades without being limited by today’s equity.
Why choose a Renovation HELOC?
- Borrow against future value — Lenders estimate your home’s after‑improved value and base borrowing limits on that figure, enabling larger projects.
- Access funds as work progresses — Funds are commonly released in draws tied to construction milestones so you only take what you need when you need it.
- Lower cost than unsecured options — Because the loan is secured by the property, Renovation HELOCs typically carry lower interest than unsecured personal loans or credit card financing.
- Flexible use — Ideal for kitchens and baths, room additions, structural repairs, energy upgrades, and other projects expected to increase home value.
How a Renovation HELOC differs from a standard HELOC
- Standard HELOC: Uses your home’s current market value to determine available equity. If your house’s present condition limits value, so does your borrowing power.
- Renovation HELOC: Uses an appraisal of the after‑renovation value to calculate equity. That means the projected increase in value from the planned improvements becomes part of the equation — often unlocking more funds up front.
Typical process (what to expect)
- Pre‑application & consultation — Discuss your renovation plans and estimated budgets with a loan officer. Provide scope, contractor bids, and proposed materials.
- Pro forma appraisal — The lender orders an appraisal or desk analysis that estimates the home’s value after the proposed improvements are complete.
- Approval & credit limit — Borrowing limit is set based on the after‑improved value, your existing mortgage balance, and your credit/financial profile.
- Draw schedule & escrow — Funds are held or released in draws tied to project milestones (e.g., foundation, framing, final inspection). Some lenders require inspections before each draw.
- Construction & draws — Contractor invoices are paid from draws; borrowers can monitor progress and disbursements.
- Repayment — During the draw period, you may have interest‑only or interest‑plus‑principal payments depending on your loan terms; the loan converts to full repayment after the draw period ends.
