You have finally decided to make some renovations so how do you access the capital needed to pay for such a large undertaking? Tile can be expensive, granite countertops are priced higher than you expected and contractors seem to charge a lot more than the last round of renovations.

There are three (3) ways a homeowner can access their home equity to help finance home improvements.

One of the most common uses (next to debt consolidation) of home equity lines is home improvement.  Most people will experience a tax deduction from the interest paid and enjoy very reasonable interest rates due to the loan being secured by real estate.  One of the advantages to using a home equity line for home improvements is that you will only to start paying interest as you as the funds are used so if takes six months for your windows to come in you can save six months interest - which can add up if you are doing a custom renovation.

A second mortgage or a Home Equity Loan is very similar to a first mortgage however you can not re-draw as this is a fixed term loan - not a revolving line of credit.  If you are comfortable with knowing your limit, confident enough with your estimates for the project and prefer a known payment for the entire term of the loan than a fixed rate second mortgage may be the better option for you.  Both programs enjoy possible tax benefits.

Instead of taking on a new loan many homeowners simply decide to refinance their existing first mortgage and incorporate some "cash out" into the new loan.  This can help the homeowner secure a lower fixed rate for the entire term of the loan and could possibly even lower monthly payments.