Options for Funding Your Kitchen Remodel

Different options are available for financing your kitchen remodel project

Options for Funding Your Kitchen Remodel

Before starting a kitchen remodel project, how much it is going to cost and how you will pay for it should be your first considerations. Many homeowners don’t understand how to get financing once they have decided to proceed with their kitchen remodel project. 

Don’t be one of them.

Average Kitchen Remodel Cost

The costs involved to purchase appliances, cabinets, flooring, lighting, countertops and the labor to make your dream kitchen a reality can be overwhelming. 

According to the National Kitchen and Bath Association, cabinetry is the biggest high-ticket item to prepare for in your budget, followed by:

  • Labor
  • Appliances
  • Countertops
  • Flooring
  • Lighting, plumbing, doors and windows, walls and ceilings

Remodeling Magazine does a cost-vs-value analysis every year for home remodeling projects. Their report for 2019 shows that the average national cost for a midrange kitchen remodel is $66,000, up from last year.

For an upscale kitchen remodel, the national average cost is $131,000, and that cost is also up from last year. 

Of course, this average cost for a kitchen renovation depends on many factors — including the size of the kitchen, the quality of the materials and the complexity of the job. Where you live is also a factor – labor and materials tend to be more expensive in bigger cities where wages and transportation costs are higher. 

If You Need Financing

Here are a few popular options if your dream kitchen will require you to finance the project.

1. Cash-out Refinancing. According to Wikipedia, with cash-out refinancing, a person starts a new mortgage process with the intention of paying off the current mortgage balance, and then taking out additional funds for other purposes – such as a kitchen remodel. Cash-out refi is a way to tap into a home’s existing equity for use on improvements. 

Here’s an example: 

A homeowner who owes $80,000 on a home valued at $200,000 has $120,000 in equity. That equity can be liquidated with a cash-out refinance loan, providing the loan is larger than $80,000.

2. Home Equity Line of Credit. The financial experts at Bankrate explain that a home equity line of credit (often called HELOC, pronounced Hee-lock) works like a credit card except your house becomes the collateral. You’re given a certain credit limit, and then you can spend up to that limit. 

A HELOC is different from a conventional home equity loan. With the HELOC, you’re not given the entire amount up front, but you use a line of credit to borrow from. 

3. Home Equity Loan. Homeowners can borrow against equity in their homes through a home equity loan. Most lenders will calculate 80% of you home’s value and then subtract what you still owe on your mortgage to figure out how much can be borrowed, according to the financial advisory site The Simple Dollar.

You should be aware that a home equity loan creates a lien against your house and reduces actual home equity. 

A home equity loan differs from cash-out refinancing:

  • A home equity loan is a separate loan on top of your first mortgage A cash-out refinance is a replacement of your first mortgage.
  • The interest rates on a cash-out refinancing are usually lower than the interest rate on a home equity loan.
  • You pay closing costs when you refinance your mortgage. And closing costs can be hundreds, even thousands, of dollars.
  • A home equity loan does not typically involve closing costs.

4. Personal loan. You can shop around at different financial institutions for competitive personal loans to be used for home improvement projects. 

5. Personal line of credit.  A personal line of credit allows you to borrow only the money you need for your kitchen remodel project. Its variable interest rate is generally lower than fixed loan rates. It’s like a credit card in that it gives you a maximum amount you can borrow. 

6. Credit cards. As a last resort, credit cards can be used to finance improvements, but they do come with the cost of very high interest rates if the balance is not paid in full when the bill comes due. However, for funding smaller projects and collecting lots of rewards points, credit cards can be a way to earn various perks in addition to the benefit of improving your home. 

Disclaimer: Please note we provide this information as a guide only for consideration when planning for a kitchen remodel. Bankrate and Simple Dollar have in-depth info regarding the different types of loans available for financing a major home remodel project. As will your own bank. 


KDP exists to offer insight and advice about all things related to kitchen remodeling. Our goal is to connect homeowners with talented, experienced kitchen designers who live and work in their communities. We are a serious resource for anyone preparing to remodel their kitchen so they can make the best possible choices about designers, contractors and products.