Home Equity Loans vs. HELOCs – Which One is Right for Your Home Improvement Project?

Your home is your biggest investment, and at some point, you may want to make some upgrades — whether it’s a kitchen remodel, a new roof, or a backyard patio. But big home improvements often come with big price tags. If you don’t have the cash on hand, using your home’s equity can be a great way to finance renovations.

But should you go with a home equity loan or a HELOC (home equity line of credit)? Let’s break down how each option works, which one makes the most sense for your project, and how to get started.

What is Home Equity?

Home equity is the portion of your home that you actually own — it’s the difference between your home’s current market value and what you still owe on your mortgage. As you pay down your mortgage and your home value increases, your equity grows.

The good news? You can borrow against that equity to fund home improvements, typically at a lower interest rate than personal loans or credit cards.

Home Equity Loan vs. HELOC: What’s the Difference?

There are two main ways homeowners can use their equity:

1. Home Equity Loan: Think of a home equity loan like a second mortgage. You receive a lump sum upfront and pay it back in fixed monthly payments over a set period, usually at a fixed interest rate. This option is best for one-time projects with a set cost.
2. HELOC (Home Equity Line of Credit): A HELOC works like a credit card — you get approved for a credit limit and can borrow what you need, when you need it. Payments are based on how much you borrow, and interest rates are typically variable. This option is best for ongoing or phased projects where costs may change over time.

Comparing Home Equity Loans & HELOC

Which One Should You Choose?

• If you have one major project and prefer predictable payments, a home equity loan is likely the better fit.
• If you have multiple projects or uncertain costs, a HELOC gives you flexibility, allowing you to borrow only what you need over time.

Either way, borrowing against your home’s equity is a smart way to fund renovations while keeping your interest rates low.

Smart Home Improvements to Boost Your Home’s Value

Not all renovations are equal when it comes to return on investment. If you’re looking to increase your home’s value, consider:

• Kitchen Remodels – Even minor upgrades can boost your home’s appeal.
• Bathroom Renovations – A modern, updated bathroom is always a win.
• Energy-Efficient Upgrades – New windows, better insulation, or solar panels can lower bills and attract buyers.
• Curb Appeal Projects – Fresh landscaping, a new front door, or a garage door replacement can make a great first impression.

Let’s Make Your Dream Home a Reality!

At Exchange Bank of Northeast Missouri, we’re here to help you find the best financing solution for your home improvement projects. Whether you’re considering a home equity loan or a HELOC, we’ll walk you through the process and find the best fit for your needs.

Stop by a branch or give us a call today to get started!

Learn More About Home Equity Loans