Key takeaways

  • Home improvement loans can be either secured or unsecured.
  • Interest rates are based largely on property value and your personal finances.
  • Avoid borrowing more than you need by setting a project budget.
  • Calculate monthly payments and interest to ensure you are borrowing responsibly and not risking your home.

A home improvement loan can be used to fund renovations and projects on your house or property. And while a complete kitchen remodel or new flooring throughout your house can be a substantial undertaking, there are several types of home improvement loans available to help homeowners finance these projects. But as with any loan, terms and rates will depend on which type of home improvement loan you choose.

How much home improvement loan can you get?

Like with many personal loans, the amount you qualify for will depend on your credit score, current debts and income. Although it can be hard to ballpark what a large project will cost, you need to have a good idea of your budget before submitting any loan applications.

The maximum amount of money you can get will also depend on what type of home improvement loan you apply for.

  • Home equity loans and home equity lines of credit (HELOCs) are based on the equity you’ve built in the property and allow you to borrow against it.
  • Personal loans are usually unsecured and instead rely on your personal finances. They can be used for home improvement, although the amount you can borrow is based on your credit.
  • An FHA 203(k) loan, also known as a mortgage rehab loan, allows you to borrow for both the home’s mortgage and renovations in one loan. This allows you to pay for necessary renovations that you might otherwise not be able to fund.

As a rule of thumb, it is unlikely you will be able to borrow more than 80 to 90 percent of your property’s value to finance renovation costs. Personal loans usually have an even lower threshold, often up to $100,000 at the very most — although most lenders set their maximum amount at $50,000 or less.

Common home improvement loan amounts

Home improvement loans typically range from $1,000 for smaller projects all the way up to $100,000 for large-scale undertakings. Although you may need excellent credit or a co-signer to qualify for larger loans and the lowest rates, keep in mind that secured loans dependent on your home’s value — like a home equity loan — allow you to borrow more.

While some projects may have a reasonably fixed cost, like a roof or HVAC replacement, other renovations may run the gamut depending on your budget and taste. Because of this, a HELOC or personal line of credit may be a more flexible and affordable option.

What influences the amount you can borrow?

The amount you can borrow will depend on the type of loan you are applying for — government loans often have more stringent requirements than those from private lenders. Most often the amount you can borrow is determined by:

  • The loan type. Loans that use your home’s equity will allow you to borrow more than an unsecured home improvement loan.
  • Your home’s current value. If you choose a home equity loan or HELOC, the current value of your property may increase your equity, which in turn can increase how much you are eligible for.
  • Your location. Since your location influences your home’s value and the return on home improvement projects, lenders may consider where you live when determining what you qualify for.
  • Your personal finances. Lenders take into account a variety of factors, but your debt-to-income or DTI ratio and credit score will be more important.

A home improvement loan may not be the best option

If mortgage interest rates have dropped since you originally borrowed for your home, a cash-out refinance may offer lower rates and more favorable terms than applying for a separate loan to fund your renovation project.

Depending on the urgency of your home improvement project, you may also consider saving toward renovation costs rather than borrowing to cover them. If your project is largely cosmetic and does not pose any immediate structural or mechanical problems, improve your budget to avoid paying interest.

Be careful how much you borrow

When you consider a renovation or project, use a loan calculator to estimate your monthly payments. Not only do you want to avoid borrowing more than your property is (or will be) worth, but you should ensure your monthly payments are manageable.

In addition, a project budget will also help you to plan for the complete cost of your renovation. This can make it easier to qualify for the amount you need — or determine if saving up is the better route.