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The home improvement loan calculator is a simple tool that allows you to estimate the monthly payments for a home loan taken towards an improvement project. It is wise to evaluate all the financial options available and gauge what you can afford when planning a home improvement. You have to be both realistic about the cost and strategic about how you will pay off the mortgage loan given a particular home improvement loan APR.

Whether you're considering a government-insured loan or an unsecured personal loan for home improvement, the home improvement or home remodel loan calculator enables you to determine your home improvement loan monthly payment so you can plan towards your repayment. This article reviews some of the financial options available for home improvements so you can decide what the best home improvement loan for you is while evaluating different scenarios for your repayment plan.

What is a home improvement loan? How do home improvement loans work?

A home improvement loan is a loan specifically offered to fund home renovations. Typically, home improvement loans are unsecured personal loans you can borrow for small projects such as repairing your bathroom, building a new kitchen, or making energy consumption improvements. Costlier projects like adding an extension to your living room, revamping or waterproofing your basement, or turning your garage into a living space often require a larger loan, usually a secured loan based on your credit score or home equity. The home improvement loan calculator is a simple tool to quickly estimate costs and repayment schedules for these projects.

Home improvements are beneficial because they create living space for your family and add value to the property if you decide to refinance or sell it in the future. Hence, making improvements to your home is a good investment because you can recoup the amount you spent with some gains.

How to use the home improvement loan calculator?

Using the home improvement loan calculator is straightforward:

  1. Input the loan amount you plan to borrow.
  2. Provide the loan term agreed with your mortgage lender.
  3. Provide the interest rate.
  4. Input the application fee percentage to get the application fee charged on the loan.

Once you've provided these details, the home remodel loan calculator will summarise the loan results on a table indicating the monthly payment, effective APR, total interest payable, and total cost required to close the loan. Note, that in the advanced mode you can set the first due date as well.

You can also get more information from the chart of balances and amortization schedule displayed below the payment summary table. Make sure to try out different scenarios to see how the monthly loan payment changes before deciding your next steps.

How to get a home improvement loan?

There are different types of home improvement loans. How to get a home improvement loan depends on whether you're an existing homeowner looking to renovate your home or a new home buyer who wants to update before moving into your new place. To choose the best option for your project, you must consider factors like your:

  • Income;
  • Debt-to-income ratio;
  • Credit score;
  • Home equity,
  • How quick the funding is approved; and
  • Repayment terms.

Governmental types of home improvement loan

Some of the standard types of home improvement loans available for consideration are as follows:

203(k) Rehab Mortgage Insurance

The 203(k) rehabilitation mortgage insurance helps homeowners finance a home purchase and the cost of its rehabilitation or the rehabilitation of an existing home. Insured by the Federal Housing Authority (FHA), the program enables homeowners to access cheap interest rates for mortgages - as low as 3% for loans. The primary requirement is that the home is over a year old, and repairs cost a minimum of $5,000. Check out our FHA loan calculator for more details.

This is the best option for an extensive home improvement project with an affordable interest rate if your home value is within the FHA mortgage limits. However, you have to meet the Department of Housing and Urban Developments' (HUD) requirements and appraisals.

Limited 203(k) Mortgage

If you want to finance home improvement or upgrades worth less than $35,000, the limited 203(k) offers a quicker route as an alternative to the standard 203(k) rehabilitation mortgage insurance.

Limited 203(k) mortgage are the best home improvement loans if you need to prepare a home for sale or need quick access to cash to pay for property repairs identified by a home inspector or an FHA appraiser.

Title 1 property improvement loan

The Title 1 property improvement loan caters to repairs and improvements for non-residential properties and structures. The HUD guarantees this loan program and allows you to finance non-residential property repairs and homes occupied for at least 90 days in conjunction with the 203(k) rehab mortgage.

This loan is the preferred option for renovating non-residential properties at a cheap fixed interest rate insured by the HUD.

If you still wonder what type of loan is best for home improvements, check the next section. We described some other non-governmental solutions.

Home equity, credit cards, and personal loans for home improvement

You have learned what home improvement loans are offered by the government. Let's now see some alternatives:

Home equity loan

Home equity loans are secured loans you can take using your house as collateral when you've paid off at least 15% of your mortgage. You can borrow up to 85% of your home value besides what you already owe in mortgage payments and repay at a fixed interest rate for up to 20 years.

The option is preferred for a significant home improvement project for which you know the cost of and require professional contractors.

Home Equity Line of Credit (HELOC)

HELOC works like a credit card that allows you to borrow as much as 85% of your home's value to finance renovations during a 10-year draw period. Once the draw period is over, then you can begin paying off what you've borrowed during a 20-year repayment period. You can choose to renew the line of credit after the repayment period is over.

Best if you have sufficient home equity, but you're unsure about the cost of the home improvement project and prefer to borrow what you need or repay the loan in stages.

Cash-out refinance

Cash-out refinancing allows you to use your home's equity to get a higher mortgage loan if the current mortgage rate is lower than what you are already paying. The new loan allows you to pay off the mortgage and take the difference in cash to renovate your home. Use our cash out refinance calculator to get more details if you prefer this option.

The refinance home improvement loan is best when you have a sizeable long-term home improvement project, and you're sure you'll recoup the costs of the loan after the home upgrade.

Personal loans

Getting a personal loan for home improvement may be desirable if you can't access any of the options already mentioned above. Personal loans are unsecured loans you can access quickly for your home renovation needs. However, getting a personal loan for home improvements may not be ideal for extensive rehabilitation projects, and most lenders offer a high-interest rate since the loan is unsecured. Still, if you have a good credit history, you can qualify for a reasonable rate and spread repayment out over up to about 12 years.

Best for short-term projects you want to manage yourself without the scrutiny of a government official.

Credit cards with 0% APR

Many credit cards offer a 0% introductory APR on purchases for new customers or periodically make such offers available for existing credit lines. It can be an intelligent way to finance a small improvement project because you will have access to an interest-free credit typically around $10,000, borrow what you need, and repay conveniently. Just make sure that you complete your repayment in full before the introductory offer expires, which is usually between 12 – 18 months.

Best when you have a small short-term renovation project and want to use the opportunity to build your credit score or earn rewards.

Home remodel loan calculator - things to consider before you take a loan

There are four main factors you must consider before taking out a loan for your home improvement project:

  1. Project cost: You can plan a budget for your project by first evaluating the cost of your home improvements, either by yourself or through a contractor. That way, it'll help you decide between a secured loan and an unsecured loan, and whether you need a government-insured loan or you should work with a private lender. Finding out the cost of your project is the vital step to deciding your loan size, which loan to get, and creating a repayment schedule.

  2. Loan interest rate: The loan interest can be a fixed or variable rate. You don't have to worry about changing monthly payments if you use fixed-rate home improvement loans. But, if you have a variable rate, your monthly payment can go up or down with changing home improvement loan APR according to market conditions, so it's wise to prepare your calculations with that in mind. The home improvement loan calculator takes into account the extra cost associated with changing interest rates over a loan term, so you can get a monthly payment estimate that's realistic.

  3. Prepayment penalties: Some loan terms come with mortgage prepayment penalties. Usually, you don't want that because it forces you to pay fees for paying off your loans early. It's better if you can get a deal with no penalties for prepayment.

  4. Payback period: Taking a loan to rehabilitate your home is an investment that has to pay off for itself in the long term. If you find it too difficult to secure a suitable loan term, it's not unheard of to move house instead. Be open to all the options, including not improving your home. The home improvement loan calculator is here to help you make an informed decision when considering the different loan options.


What is the difference between a secured and unsecured home improvement loan?

The secured home improvement loan requires that you put your property up as collateral. If you fail to repay the loan within the agreed conditions, you can lose your home to the lender.

Unsecured loans don't require you to put down anything as security for the amount you borrow, but there are limits on how much you can borrow, and you must meet strict requirements to show that you can pay back the loan.

What type of loan is best for home improvements?

The best option depends on the size of the project and your confidence to repay the loan. If the improvement project's cost is low and you can finish it within a short term, you can consider an unsecured loan provided you have a good credit history.

Otherwise, you should use a secured loan that offers flexible repayment over the long term for the most expensive home rehabilitation projects.

What is the best reason to take a home improvement loan?

There are different reasons to take a home improvement loan. But it may be worth it when:

  • Your home needs urgent repairs, and you cannot afford it, but you have some home equity;
  • You want to put your home up for sale and you need to increase your home value; or
  • You have a growing family and you need more living space.

The sooner you improve the conditions around your home the less it will cost as you will pay less in inflation.

Can I take a home improvement loan when buying my first home?

Yes. The FHA-insured 203(k) mortgage allows you to take improvement loans for your first home purchase. Getting a secured home loan in the private mortgage market may be challenging if you don't have home equity up to 15% of the home value.

You may also want to consider taking a personal loan or choose to go the route of a cash-out refinance to get your improvement projects underway.

Are home improvement loans tax deductible?

Yes. Home improvement loans are tax-deductible if you do them for medical reasons or to improve your home's energy conservation.

Otherwise, you can refinance a home improvement loan with a federal-insured loan to reduce your tax liability.

Tibor Pál, PhD candidate and Oghenekaro Elem
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Monthly payment$1,001.90
Annual Percentage Rate (APR)7.669%
Loan term5 years
Loan principal$50,000.00
Total interest payable$10,113.85
Loan fees$200.00
Total payments$60,313.85