HELOCs for Home Repairs

A home equity line of credit (HELOC) is one of the best solutions for financing home repairs. HELOC financing is flexible and offers the lowest rates, and your repairs may be tax-deductible if you itemize deductions on your tax return.  The main downside is getting a HELOC takes time. Waiting for a home appraisal and […]

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A home equity line of credit (HELOC) is one of the best solutions for financing home repairs. HELOC financing is flexible and offers the lowest rates, and your repairs may be tax-deductible if you itemize deductions on your tax return. 

The main downside is getting a HELOC takes time. Waiting for a home appraisal and the loan process can be tough if you need repairs now. Yet you might prefer a HELOC for its many benefits and features. We’ll cover the best HELOCs for home repairs and more.  

3 best HELOCs for home repairs

When considering a HELOC for your home repairs, it’s essential to select the right lender for your needs. Here are our top three recommendations.

Figure – Best overall

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LendEDU rating: 4.9 out of 5

• Competitive fixed rates: 8.35% – 16.55%
• Quick and hassle-free process
• Must borrow 100% of your credit line (minus fees) at closing

Figure stands out as our top HELOC lender for its competitive fixed interest rates, which allow borrowers to capitalize on their equity. 

The application process is a breeze, with requests handled online for added convenience. Behind the scenes, Figure’s leadership team is made up of experienced financial professionals, ensuring it upholds the highest service standards.

Because Figure requires an initial draw of 100% of the credit line, we think borrowers planning to borrow the full amount for their home repairs are the best fit for this product. Hitch is not available in Delaware, Hawaii, Kentucky, New York, or West Virginia.

Hitch – Best for accessing up to 95% of equity

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LendEDU rating: 4.4 out of 5

• Only available in 6 states (listed below)
• Rates starting at 7.75%
• Must borrow 100% of your credit line (minus fees) at closing

Hitch has streamlined its approval process to deliver funds in record time. In addition to speed, Hitch excels in customer service, offering comprehensive support throughout the loan process. The lender lets borrowers take out up to $500,000, or 95% of their home equity. 

However, similar to Figure, Hitch requires a 100% initial draw, so it’s best for those who plan to spend the full amount on repairs. As of April 2024, Hitch only lends in Colorado, Florida, Maryland, Oregon, Utah, and Washington, D.C.

Bethpage FCU – Best credit union

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LendEDU rating: 4.2 out of 5

• 12-month intro rate of 6.99% for VantageScores of 720 and up; then a variable rate
• Borrow $10,000 to $1 million
• No application, origination, or appraisal fees

Bethpage Federal Credit Union (FCU) offers its members flexible repayment terms and lower rate options. It’s rooted in community service and offers a more personalized approach to lending than larger commercial entities. You must be a member of the credit union to qualify for its HELOC, but joining is easy. Just open a Bethpage savings account with a minimum balance of $5.

Bethpage offers the opportunity to convert part of your HELOC to a fixed-rate option. The minimum initial draw requirement for borrowers who take advantage of the low 12-month introductory rate is $25,000.

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Best HELOCs

How do you use a HELOC for home repairs?

A HELOC is like a credit card that uses your home’s equity as collateral. You can borrow from the line of credit when you need to. 

Your credit limit is based on:

• The home’s value
• The amount of equity you have in it
• Your personal qualifying factors (income, debt, credit score, and credit history)

As you repay it, you regain access to the amount of credit issued to you. 

The major features of the HELOC make it ideal for home repairs. 

Flexible use

When you’re making purchases with a HELOC, you don’t need to ask the lender’s permission. With few exceptions, you can use the HELOC as you see fit. When it comes to home repairs, you can use the HELOC up to the limit you were approved for, whether it’s to pay for supplies or to hire a contractor. 

Flexible repayment

In the beginning, you’ll have a draw period for your HELOC, during which you can take out funds while making a smaller minimum payment. The minimum payment changes to a higher amount when you enter the repayment period. This is ideal for home repairs and renovations, where you need access to cash upfront with the ability to borrow more later. 

Low interest rate

A HELOC offers among the lowest interest rates available on a loan. Your home acts as collateral, so the lender assumes less risk. Borrowers are more likely to make payments because they stand to lose their homes if they don’t, which translates into a lower interest rate for you. 

Higher loan amounts

A credit card or a personal loan may not be enough to cover the cost of a major home repair or renovation, but a HELOC, with its lower interest rate and your home equity as collateral, may be able to grant you access to more funds. 

How much can you borrow with a home repair HELOC?

The amount you can borrow with a HELOC depends on:

• The maximum LTV ratio the lender allows
• The home’s market value
• The amount of equity in the home
• How much you qualify for based on your income and debts

It’s common for lenders to loan up to 85% of a home’s value—sometimes more, as is the case with Hitch. Here’s our quick math for a rough estimate on a home worth $400,000 with a mortgage of $200,000:

• Home’s market value: $400,000
• Estimated maximum loans: $400,000 X 85% (0.85) = $340,000
• Remaining amount on the mortgage: $200,000
• Possible HELOC amount: $340,000 – $200,000 = $140,000

Of course, how much you qualify for is based on your income and debts. In other words, even if it’s possible to get a $140,000 home equity loan, the lender will approve you for a line of credit it feels you can comfortably repay, which may be much less than the maximum HELOC amount. 

Is a HELOC the best way to finance home repairs? 

A HELOC isn’t the only way to finance home repairs. You may want to consider the following options. Each has its purpose, benefits, and trade-offs compared to a HELOC.

HELOC

HELOCs are more flexible than other loan types because you only need to borrow and pay back what you need. However, it may take longer to pay back a HELOC if you don’t immediately repay the loan beyond the minimum payment. Many HELOCs come with a variable interest rate.

Home equity loan

Home equity loans are similar to HELOCs because they are secured by the home’s equity. However, they have a set loan amount, fixed interest rate, and a fixed repayment plan that starts with your first payment. Funds are distributed once, all upfront. 

If you know how much you need for home repairs, a home equity loan over a HELOC might be the best option. 

Personal loan

Borrowers should opt for a personal loan over a HELOC when they don’t want to use their home as collateral. The trade-off is a higher interest rate for a personal loan. Repayment terms tend to be shorter for a personal loan. Even though you have a higher interest rate, you may pay less overall.

Cash-out refinance

A cash-out refinance replaces your old mortgage with a new one. The interest rate, payoff date, and terms are different. If you have equity in your home, you can get the difference as a cash refund with the new mortgage, and use it to pay for home improvements.  

Borrowers who want one payment or simpler finances may prefer a cash-out refinance over a HELOC. A HELOC is a second mortgage you’ll pay in addition to your original mortgage. 

Our expert’s advice: Most important features to consider

Erin Kinkade

CFP®

I think the most important features are the interest rate, whether it’s fixed or variable, the time it takes to get funds, repayment terms, and the likelihood of being approved, along with the average length of time it takes the financial institution to issue an approval.

Can you use a HELOC to repair a house before selling it?

Yes, you can use a HELOC to repair your home before selling it. And if you’re still living in the home, you may have a good chance at qualifying for owner-occupied rates if you need to apply for one. Here’s how it works on a basic level:

1. Qualify for the loan 
2. Receive funds
3. Pay for repairs
4. Make the minimum monthly payment until you sell the home
5. Sell the home
6. HELOC is paid off with proceeds from the sale

When you sell, your HELOC and mortgage are paid off at closing, so you don’t need to worry about repaying the HELOC before you sell your home. 

A HELOC can take two to six weeks to fund. That’s important if you plan to make repairs and sell the home quickly. 

How to get a HELOC for home repairs 

Getting a HELOC for home repairs involves a home appraisal, which means it can take longer than other types of loans that don’t involve home equity. However, if you can wait two to six weeks, you can access a large sum for a lower interest rate with a HELOC.  

• Online application. You’ll start the process of getting a HELOC by applying online. Some lenders offer the ability to prequalify for a loan, which means they can conduct a soft credit check and approve or deny you for a loan based on what they find. 
• Approval. Many lenders can approve loans on the same day—some within minutes—and you’ll quickly know whether you’re eligible. 
• Document collection. You’ll get loan disclosures and a list of required documents to process your loan. The sooner you can submit these documents, the sooner you can move toward closing on the loan.  
• Property appraisal. A property appraisal is the next step to getting a HELOC. If you need an in-person appraisal, the loan may take longer to process. However, appraisal types include a full appraisal, desktop appraisal, drive-by appraisal, hybrid appraisal, or automated valuation model (AVM). Your lender may not require a full appraisal for a HELOC, which can keep the process moving along. 
• Underwriter review. After you submit your documents and the home has been appraised, the underwriter can review your application and weigh it against the lender’s HELOC requirements.  
• Loan is processed. Your loan can be processed once the underwriter gives the go-ahead. You may need to update documentation at this stage.
• Close on the loan. Once you’re cleared to close, you’ll receive your final disclosures and schedule a time to sign. 

Recap of the best HELOCs for home repairs 

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