Your Home Can Help Pay for Its Own Upgrades

Have you been thinking about remodeling your kitchen, upgrading your backyard, renovating a bathroom, or adding more living space? If you’ve owned your home for a while, you may have built up equity that could help pay for those improvements. That equity isn’t only something you benefit from when you sell your home. In some cases, you can access a portion of it while continuing to own and live in the property.

Two popular ways homeowners can access their equity are a HELOC (Home Equity Line of Credit) and a Home Equity Loan (HELOAN). Both allow you to borrow against the equity in your home without necessarily refinancing your existing first mortgage. This can be especially helpful if you already have a favorable interest rate that you don’t want to give up. However, HELOCs and HELOANs work differently and can be better suited for different goals.

A HELOC is generally better suited for shorter-term or flexible borrowing needs. It works like a revolving line of credit, allowing you to access money as you need it instead of receiving everything upfront. HELOCs also typically have variable interest rates, meaning your rate and payment can increase or decrease over time. This can make them useful when you need access to money temporarily or aren’t sure exactly how much you’ll need.

For example, maybe you need $20,000 now but expect to repay a large portion of it within the next year. A HELOC gives you the flexibility to borrow, repay, and potentially borrow again during the draw period. You generally pay interest only on the amount you’ve actually borrowed, rather than your entire available credit line. That flexibility is one reason homeowners may consider HELOCs for shorter-term needs.

A Home Equity Loan can be better suited for longer-term borrowing, especially for a large home improvement project with a known cost. Instead of a revolving credit line, you typically receive the money in one lump sum. HELOANs also commonly have a fixed interest rate, giving you a more predictable monthly payment over the life of the loan. That predictability can make budgeting for a large project much easier.

For example, if you’re planning a $60,000 kitchen remodel that you expect to pay back over several years, a HELOAN may make more sense than a variable-rate HELOC. You receive the funds upfront and know what your principal-and-interest payment will be from the beginning. You also don’t have to worry about your interest rate changing simply because market rates move. For a long-term home improvement project, that stability can be valuable.

Neither option is automatically better—the right choice depends on how much you need, how long you expect to borrow it, and how you plan to use the money. A HELOC may offer more flexibility for shorter-term needs, while a HELOAN may provide more stability for longer-term projects. Before starting a major renovation, it can be worth comparing both options based on your available equity and financial goals. The equity you’ve already built in your home may help you make the next improvement to it.