Options for Home Renovations with Little Equity

A dream house doesn’t stay a dream house forever. Over time, parts of it need updating, renovating or replacing. If you need a home renovation loan with no equity or very little, you still have options. They range from cash and grants to FHA and Fannie Mae renovation mortgages.

Putting in a gas fireplace, building a deck or getting a new air conditioner all take money.

One of the biggest mistakes homeowners can make is financing a home improvement for longer than the improvement will last, says Casey Fleming, author of “The Loan Guide: How to Get The Best Possible Mortgage.” He has been a mortgage professional in the San Francisco area for decades.

“There are many options to look into when it comes to getting the money you need for improvements,” he adds.

Here are some of the different ways you can get your home improvements completed.

Check your cash-out refinance interest rates. Start here (Nov 9th, 2026)

Cash

HUD calls cash the thriftiest way to pay for improvements, since you don’t have to use any financing. Your tax refund would be a good start, and you can sell one or more of your assets to get some extra cash.

“To save money is tough for some people. But you have to be diligent and buckle down on expenses,” Fleming says. “It’s all about priorities: a new kitchen or a Harley.”

Home equity line of credit (HELOC)

“This provides you with a tremendous amount of flexibility at a low cost,” he says. “And you don’t need a whole lot of equity in your property.”
Equity line lenders cap your combined loan-to-value (CLTV) for a home equity line of credit. As a result, your credit limit is generally a percentage of your home’s appraised value minus what you owe on your mortgage. If your CLTV is too high, you can either pay down your current loan amount or wait until your home value has increased.

Also, you don’t pay interest until you actually use the money. You can borrow from the line during a set draw period, and some lenders let you renew it.

Credit cards

This could be a huge risk if people don’t understand all the ramifications.
“If you get half way through your renovation, and you run out of cash or credit or both, it’s impossible to get a home loan to consolidate them,” Fleming says. “You can’t get a new loan if the work is partially complete.”
Most people don’t know this, and it can be tragic. He has seen people who have nowhere to turn for money when only half of the work is complete.

Full construction loan for a renovation that costs more than your equity

Full construction loans are usually short-term loans that you must refinance into a traditional mortgage loan once the home is complete.

You can only use these loans to build a house or make a major renovation. It could be a good idea if you are building a major addition such as a master bathroom which costs more than the equity you have in your house.

There are a lot of requirements for these loans, and the lender doesn’t release the money until you finish parts of the remodel.

Contractor financing

Some contractors will offer in-house financing.
“They try to entice you with 12 months same as cash. But these can be really expensive options,” Fleming says.
The upfront fees can be very high, and even if they charge the contractor the upfront fee, the contractor may build that into your price with either a higher interest rate or slightly lower-quality materials.

Private and government-funded grants

Along with private and government-funded grants, you might even be lucky enough to live in an area with organizations offering private or corporate grants for remodeling. Check with your county for this type of help.

Some organizations even offer the manpower to do the work if you are unable to afford the work or complete it yourself. There also are home improvement grants and loans for specific groups of people including seniors.

Also, check with government agencies in your state, county or towns for help. For instance, the USDA Rural Development administers the Single Family Housing Repair Loans and Grants Program, which offers loans up to $40,000 and grants up to $10,000, for combined assistance of up to $50,000. Grants are for owners 62 or older with very low income.

Reverse mortgage

If you are 62 or older, you can use a reverse mortgage for anything you want.
“Literally, these mortgages can save people’s lives. If a roof fails, and they can’t qualify for some other loan, they can get a reverse mortgage to pay for the roof,” he says.

FHA 203k loan for a home renovation

You can use FHA 203k loans for refinancing if your house requires a lot of repairs. The problem is that, like other FHA loans, you will have to pay for mortgage insurance. It lasts the life of the loan if you put down less than 10% (loan-to-value above 90%). With 10% or more down, it ends after 11 years.

The FHA Limited 203(k) program (formerly called Streamlined 203(k)) also is available for up to $75,000 for less major remodels.

Fannie Mae Homestyle Renovation Loan based on the finished home value

This type of loan allows homeowners to finance a moderate home renovation with a single-close first mortgage, rather than a second mortgage, home equity line of credit, or other, more costly methods of financing.

The loan amount is based on the “as-completed” value of the home rather than the present value.
“You can include luxury items with this loan such as a pool, outdoor kitchen and landscaping,” Fleming adds. “There are fewer hoops to jump through compared to an FHA loan.”

Title I Home & Property Improvement loan

The good thing about these loans for private lenders is the Department of Housing and Urban Development (HUD) insures them against loss.

These loans offer help for both large and small improvements. The maximum amount is $25,000.  HUD points to Title I for repairs that don’t also require buying or refinancing the home.

Without a home equity loan, you still have plenty of options for a major renovation. Renovations can increase the value of your home while also making it more comfortable to live in.

Check your cash-out refinance interest rates. Start here (Nov 9th, 2026)