Selling your home is a big decision—and preparing it for the market can be overwhelming, especially if your home needs updates to attract buyers. But here’s the dilemma: the right renovations can increase your home's value, but they can also come with hefty costs upfront. How do you pay for these upgrades without draining your savings?
Here at JSB Home Solutions, we’ve teamed up with Kendra Carter of The Carter Group with Keller Williams Realty, a leading realtor in the Columbus, Ohio area. Our goal is to break down the best financing options for home improvements before selling, no matter who you choose to renovate or sell your home. With Kendra’s deep understanding of what buyers look for and our 46 years of remodeling expertise, we’ll guide you on how to make smart financing choices that can boost your home's value and attract more buyers.
By the end of this article, you'll know the financing options available, understand which ones might fit your needs, and feel prepared to make the best choice for your situation.
Table of Contents:
- Why Renovate Before Selling?
- What Are Your Financing Options for Home Remodeling?
- 3 Steps to Choose the Right Financing Option for Your Situation
- Is It Worth Financing Home Renovations Before Selling?
Why Renovate Before Selling Your Home?
Renovating before selling can be a strategic move to increase your home’s appeal and value, helping it stand out in a competitive market. “77% of buyers won’t consider purchasing a home that isn’t “move-in ready”,” according to a nationwide study done by Curbio. When a home feels fresh and well-maintained, buyers are more likely to envision themselves living in it, which can result in quicker offers and potentially higher sale prices. By tackling key updates, you can also address any issues that might otherwise come up in inspections or negotiations, saving time and stress during the closing process.
As Kendra Carter of The Carter Group explains,
“Buyers often gravitate toward homes that feel updated and well-maintained. A few smart upgrades can create a powerful first impression and impact their offers.”
From updated kitchens to modern bathrooms and enhanced curb appeal, these improvements show buyers the home has been cared for and is worth their investment.
Common Renovations That Add Value Before Selling
The most value-boosting projects often include kitchen remodels, bathroom upgrades, and curb appeal enhancements like landscaping or fresh paint. These improvements not only make your home more attractive but can also increase your home’s value—allowing you to list at a higher price.
What Are Your Financing Options for Home Remodeling?
Exploring the right financing options is key to keeping your remodel within budget. Here are some popular choices, along with their benefits and drawbacks:
Home Equity Loans
A home equity loan allows you to borrow against the equity you've built in your home, typically at a lower interest rate than other loans. Since home equity loans are secured against your property, you’ll need to pay off the loan balance in full once you sell the home. This can be manageable if the expected increase in your home’s sale price covers the loan and any associated costs. Kendra suggests,
“This option is great if you have substantial equity and want a predictable repayment schedule.”
Pros: include low-interest rates and potential tax benefits, but cons involve using your home as collateral, which can add risk.
When should you consider a Home Equity Loan for home renovations?
Home equity loans are generally best for projects that significantly boost home value, as they allow you to recoup most (or all) of the renovation expenses in the final sale price.
Home Equity Line of Credit (HELOC)
A HELOC works similarly to a credit card, allowing you to draw funds as needed, but it's secured by your home. A HELOC can be a smart option if you’re planning to sell within a few years and need flexibility in accessing funds as needed. This type of credit line allows you to borrow only what you need, when you need it, which can be helpful if you’re handling renovations in stages. However, keep in mind that HELOCs typically come with variable interest rates, meaning your payments could increase. Also, like a home equity loan, you’ll need to pay off the HELOC balance once your home sells, so it’s best suited for projects that will enhance the home’s resale value.
Pros: Flexible borrowing that gives you access to funds as projects progress, with interest only on the amount used. Cons: The interest rates can fluctuate.
When should you consider a HELOC for home renovations?
For short-term selling plans, a HELOC is most effective if you can handle fluctuations in monthly payments and if the renovation costs are likely to be recovered in the sale.
Personal Loans
Personal loans offer a straightforward option, with fixed interest rates and no collateral required. Personal loans are ideal for homeowners who need a straightforward, unsecured option, especially for smaller projects. Since they don’t require collateral, personal loans don’t put your home at risk, which can be appealing if you’re unsure of your selling timeline. Approval times are often quick, making them a good option if you need funds urgently. However, personal loans generally come with higher interest rates compared to options like home equity loans or HELOCs, so they’re best used for smaller renovations that don’t exceed the loan amount you can comfortably repay.
Pros: No risk to your home, fast approval. Cons: Higher interest rates than home equity loans.
When should you consider a personal loan for home renovations?
If you’re tackling upgrades like painting or light fixture replacements that can improve your home’s appeal but don’t require a major investment, a personal loan could be a convenient solution.
Credit Cards
Using credit cards for minor renovations can be convenient, especially if you can pay off the balance quickly. Using a credit card can be convenient for minor home improvements, especially if you can pay off the balance quickly to avoid high-interest charges. Credit cards might be helpful for small updates that don’t require substantial borrowing, like purchasing fixtures or supplies for DIY projects. Some cards offer rewards or cash back, which could add some value. However, credit cards typically carry high-interest rates, which can accumulate quickly if the balance isn’t paid off soon.
Pros: Accessibility and potential rewards. Cons: High-interest rates, so not ideal for larger projects.
When should you consider credit cards for home renovations?
In general, it’s wise to use a credit card only if your renovation costs are low and you have a clear plan to pay off the amount within a short period. For larger projects, other financing options are likely to be more cost-effective.
Cash-Out Refinance
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With a cash-out refinance, you refinance your mortgage and pull out cash from your home equity. A cash-out refinance can be a viable option if you have substantial equity and want to tap into a large amount of funds for significant renovations. With typically lower interest rates than personal loans or credit cards, cash-out refinancing can offer more favorable terms if you’re looking to increase your home’s market value significantly before selling. However, keep in mind that refinancing comes with closing costs and extends your mortgage term, so you’ll need to assess whether these expenses will be balanced by a higher sale price.
Pros: Lower interest rates than personal loans and a potentially larger amount. Cons: Extends your mortgage payments, and you’ll need to cover refinancing costs.
When should you consider a cash-out refinance for home renovations?
If you have time to manage the refinancing process and the renovation impact, cash-out refinancing can be an effective solution for adding value before a sale.
Contractor Financing
Some contractors offer financing directly to homeowners. Contractor financing can be a convenient option, especially if you’re working with a specific contractor who offers low or even zero-interest options for a certain period. This can be helpful if you need a financing solution tailored to your renovation project and don’t want the hassle of a separate loan process. However, the terms can vary widely, so it’s important to compare the interest rates, repayment terms, and any hidden fees. For information on JSB's financing options, you can check out our blog or our JSB's financing page.
Pros: Convenience, often with zero-interest options for a set period. Cons: Limited terms and may only cover specific projects.
When should you consider contractor financing for home renovations?
For homeowners preparing to sell, contractor financing could be a solid choice for smaller projects if the terms are competitive. Be sure to review and compare with other financing options to ensure it’s the best deal for your needs.
3 Steps to Choose the Right Home Remodeling Financing Option
#1: Consider the Cost of Renovations
The first thing to do is consider the cost of renovations. Do they fit in your budget and will you be able to recoup much or all of the cost when your house sells? The average cost of a kitchen remodel is $20,000 - $50,000. Bathroom renovations usually cost $10,000 - $30,000 on average. If you’re undertaking larger projects, options like a HELOC or cash-out refinance might make sense. For smaller updates, credit cards or personal loans could be more manageable. Kendra points out,
“Align your financing choice with your project scope and budget to avoid overextending yourself.”
#2: Determine How Soon You Plan to Sell
Your timeline influences the best financing choice. Short-term plans might favor quicker, lower-commitment options like credit cards or contractor financing, whereas long-term plans could accommodate home equity loans or refinancing.
#3: Consider Your Current Financial Situation
Review your credit score, income, and current debt before selecting a financing method. Good credit can secure lower rates on personal loans and HELOCs, helping you manage renovation costs more affordably.
Is It Worth Financing Home Renovations Before Selling?
Before committing, weigh the potential resale value against the cost of financing. Ask yourself, will this renovation truly add value to my home, or is it an expense?
“Think of it as an investment,” Kendra advises. “Some renovations pay off, while others might not bring the returns you expect.”
How do you know if the renovation will pay off?
To determine if a renovation will pay off, consider the project’s potential return on investment (ROI) and how it aligns with buyer preferences in your area. Generally, high-impact areas like kitchens, bathrooms, and curb appeal updates yield the best returns. Talk to a realtor familiar with your market to get insights on what buyers are looking for and which renovations add value. As Kendra points out,
“A kitchen update, even if minor, often appeals to buyers, while some larger projects may not add as much value unless they address a noticeable need.”
Also, consider how the renovation affects your home’s competitive positioning. If similar homes in your area are recently updated, a renovation can make your listing more appealing and potentially speed up the sale.
How Do I Choose the Right Financing Option for My Situation?
Financing home renovations before selling can be a strategic move to increase your home’s appeal and value. By exploring different financing options and carefully considering your financial situation, you can make informed choices that enhance your property’s marketability and final sale price.
If you’re considering a large remodel project and not planning on selling right away after the project is completed, a home equity loan or home equity line of credit (HELOC) could be the best choice for you.
If you are completing smaller projects and upgrades and want to sell soon after finishing the renovations, a personal loan, credit cards, or contractor financing might be the way to go. We’ve mentioned contractor financing in this article, and at JSB, we offer several financing options. Read this article for specific examples of contractor financing packages if you think this could be the best option for you.
If you want lower interest rates or a larger amount than what personal loans, credit cards, and contractor financing offer, and don’t mind going through the refinancing process, a cash-out refinance could be what you are looking for.
If you're ready to start the financing process, consider consulting a financial advisor or discussing your goals with a trusted realtor who knows the Columbus, Ohio housing market. Remember, the goal is to make smart, value-driven decisions that pay off at closing. For more guidance on financing and renovation tips, schedule a consultation today!
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