How to Finance a Kitchen Remodel 

Over time, what once was your dream kitchen can end up tired, worn, and outdated. You may be convinced that the only way to restore it to its dreamy state is by remodeling — but before you grab that sledgehammer and start demo, there’s one big question you need to consider: can you afford it? 

A kitchen remodel can be an expensive endeavor! The types of countertops you choose, the cabinets you want, the flooring and backsplash you love — it can all add up! That’s why it’s important to get an estimate of your project’s cost upfront and make sure you set (and stick to) a budget. It’s also a good idea to make sure the updates you’re making will hold their value and yield a good return on investment. Once you have all this figured out, it’s time to consider how you’re going to pay for it! 

Fortunately, there are several options for financing a kitchen remodel and making its transformation affordable. Here’s a closer look at seven of the financing choices out there to help you determine which would work best for you, your budget, and that dream kitchen of yours. 

1. Finance a Kitchen Remodel with a Home Equity Loan 

A Home Equity Loan, or HEL, provides you with a lump cash sum, using your home’s equity as collateral (which is why it’s important to be sure you’ll be able to pay it back!). You can pay off this loan with regular payments at a fixed rate or all at once at a specified time. The nice thing about an HEL is that since the interest rate is fixed, you will not be affected by any market fluctuations.  

2. Finance a Kitchen Remodel with a Home Equity Line of Credit 

This is probably the most cost-effective, and thus the most popular form of financing a kitchen remodel. A Home Equity Line of Credit (HELOC) also borrows your home’s equity, but differs from an HEL in that instead of a lump sum, it provides you with a revolving line of credit, much like a credit card, which you can then use as you wish over time. 

This type of loan is broken up into a draw period during which you can take money out and only pay back interest, followed by a repayment period when you’re to pay off the principal and remaining interest. Again, since your home’s equity is used as collateral, you need to know for sure you’ll be able to pay your loan off completely. If you can, this is a great option!

Of course, first you have to qualify. You need good credit and enough equity on your home to be eligible for this type of financing. Lenders determine if you’re a good candidate by calculating your loan-to-value (LTV) ratio, which is what you currently owe on your mortgage divided by the appraised value of your home. 

3. Finance a Kitchen Remodel by Refinancing Your Mortgage

If you’ve been in your home a while and have built up enough equity, this can be the perfect option for you! Start by shopping around for a better mortgage rate, then refinance your current mortgage and use the money you save to fund your kitchen remodel. Cash-out refinancing is a variation in which you refinance your mortgage for more than what you owe and take the difference in cash to put toward your remodel. 

Keep in mind, though, that there are a handful of fees involved in the refinancing process, and it can also take a bit longer than other options. 

4. Finance a Kitchen Remodel with a Home Improvement Loan

Different from a home equity loan, this type of financing doesn’t borrow from your equity, but works just like a personal loan in that you borrow money from a lender without collateral. Depending on your credit score, this type of financing may have a higher interest rate, but you won’t be risking losing your home if you run into trouble making payments on your loan. 

Home improvement and personal loans also tend to have a faster turnaround time than other financing options, and that means you can get going on that demo sooner!

5. Finance a (Small!) Kitchen Remodel Using a Credit Card

This option is only recommended if you are making just a few updates or low-budget upgrades, or you plan on taking your time for the big reveal, paying off each purchase as you go. Using a credit card to finance a large kitchen remodel project that you can’t pay back quickly can result in accumulated interest and debt, and no one wants that — no matter how dreamy their kitchen turns out!  

6. Finance a Kitchen Remodel with a Federal Program

One financing option worth looking into is a possible loan from the US Department of Housing and Urban Development (HUD), which provides FHA and other types of loans for qualifying homeowners. This type of loan is based on the value of your home after renovations rather than before, which means since your home will be worth more, the amount you can borrow is greater. 

However, be warned: these loans include refinancing your home or taking out a new mortgage and have a lengthy application process to boot, so choose this option only if you are not in any hurry to get your kitchen reno project off the ground!

7. Finance a Kitchen Remodel with a Contractor Loan

Sometimes kitchen remodeling contractors and materials companies offer finance programs for their clients and customers. This option is convenient since it allows you to get everything you need, get it done, and get it financed — all in one shot. 

Want some help figuring out how to pay for your kitchen remodel? No problem! You can minimize the hassle of financing by choosing Standard Kitchens. Not only do we have expert designers to help find products within your budget, but we also have a great financing option with Mosaic. If you have questions regarding financing any type of home improvement project, we’re happy to help you find the best solution. Give us a call or contact us online today.