How to Pay for a Remodel: Cash, Home Equity, Personal Loans and Contractor Financing

Who this is for: North Dakota homeowners who want to remodel without paying the full price at once, and want to understand the options before talking to a lender.

Short answer

Most homeowners pay for a remodel in one of five ways: cash, home equity (a home equity loan or HELOC), a personal loan, financing arranged through the contractor, or a credit card. The biggest difference is what secures the debt. Home equity borrowing uses your house as collateral, while personal loans typically don't. Before you choose, compare the APR, fees and total cost of each offer, not just the payment.

This guide explains how each option works and what to ask. It's general information, not financial advice. For advice on your situation, talk with a lender, credit union or financial advisor you trust.

Five ways to pay

Each option fits a different situation, and many homeowners combine two, such as savings for the deposit and a loan for the rest.

Ways to pay for a remodel compared

Option	Secured by	Speed	Best for	Watch out for
Cash or savings	Nothing	Immediate	Smaller projects, or when you have reserves	Draining your emergency fund; keep a cushion for surprises found behind walls
Home equity loan or HELOC	Your home (a second mortgage)	Slower: application, approval and closing	Larger projects when you have equity	Your home is the collateral; HELOC rates are usually adjustable; upfront fees and costs
Personal loan	Typically no collateral	Usually faster than home equity	Mid-size projects without tapping equity	Rates depend heavily on credit; origination fees on some loans
Contractor-arranged financing, such as our remodel financing through Acorn Finance	Depends on the lender and loan type	You can check offers online before signing	Comparing several lender offers at once	It's still a loan from a third-party lender; compare it like any other offer
Credit card	Nothing	Immediate	Small purchases you can pay off quickly	High standard rates; "deferred interest" promotions

Sources: the Consumer Financial Protection Bureau's explainers on home equity loans vs. HELOCs and home equity loan costs, and Equifax's guide to home improvement personal loans. If you'd like to see what contractor-arranged financing looks like for your project, you can compare offers through Acorn Finance through our partner link.

Using home equity: what to know

A home equity loan pays you a lump sum, while a HELOC works like a credit line you can draw from more than once. Both are second mortgages that you repay on top of your first mortgage, according to the CFPB. A home equity loan usually has a fixed rate, and a HELOC usually has an adjustable one, so its payment can change.

Home equity often makes sense for bigger projects like a basement finish or an addition, but the trade-off is real: the loan is secured by your house. Home equity loans may also carry upfront fees and costs, which is why the CFPB suggests comparing "more than just your monthly payment." One protection worth knowing: when a loan such as a home equity loan is secured by your principal home, federal Truth in Lending rules generally give you a right to cancel until midnight of the third business day after closing or after you receive the required notice and disclosures, whichever is later. Loans to buy or build the home aren't covered by that right.

Contractor-arranged financing

Contractor-arranged financing means your contractor partners with a lender or lending platform, so you can check offers as part of planning the project. Our partner is Acorn Finance. Here's how it works, based on Acorn's own descriptions:

• What Acorn is: a lending marketplace. You fill out one form and see offers from its partner lenders. Acorn itself is not a lender and doesn't make credit decisions.
• Loan amounts: qualified applicants may see offers from $1,000 to $100,000.
• Rate, term and monthly payment: set by the lender for each offer, and shown to you before you choose one.
• Credit impact: checking initial offers uses a soft credit inquiry; moving forward with an offer may affect your credit score.
• Approval: all loans are subject to credit review and approval by Acorn's lending partners.

A few things stay the same no matter who arranges the loan. The loan is between you and the lender, so read its terms as carefully as you'd read a bank's. Compare any offer with what your own bank or credit union quotes. And never let a financing offer rush your decision on the project itself.

Paying your contractor: deposit and milestones

Line your financing up with the contractor's payment schedule before you sign. Most remodels use a deposit at signing, progress payments as stages are finished, and a final payment after the walkthrough. Here's how to agree on a payment schedule that protects you.

The North Dakota Attorney General's guide on choosing a contractor lists requiring payment in full before the work is completed as a warning sign. If your loan pays out as a lump sum, keep the funds aside and pay each milestone as it's reached. With a HELOC, you can draw as payments come due.

Build in a cushion, too. Older homes in Bismarck and Mandan can hide water damage or framing problems that only show up during demolition. On our projects, the deposit, any milestones and the final balance are spelled out in your written estimate before you sign. On one HHI flooring estimate, that was 50% to book the job and 50% at completion. That's our payment schedule, and it's separate from the lender's payment schedule. Any hidden damage is shown and priced before we proceed.

Questions to ask any lender

Ask every lender the same questions so you can compare offers side by side:

• What's the APR, not just the interest rate, and is it fixed or variable?
• What fees apply: origination, closing, late or prepayment?
• Is the loan secured by my home?
• What's the total I'll repay over the life of the loan?
• Is checking my rate a soft or a hard credit pull?
• When are funds released, and to whom: me or the contractor?
• If there's a promotional rate, what happens when it ends? Is it deferred interest?

That last question matters. The CFPB explains that with a deferred interest promotion ("no interest if paid in full"), interest going back to the purchase date can be added if the balance isn't paid off in time. With a true 0% intro APR, interest starts only when the promotional period ends.

Frequently asked questions

How do I finance a home addition?

Additions are usually larger projects, so homeowners with equity often look at a home equity loan or HELOC, while others use a personal loan or contractor-arranged financing. Get a written estimate first, so you know the amount to borrow. Then compare APRs, fees and total cost across at least two lenders before you commit.

How do you finance a remodel?

Start with the estimate, then pick the option that fits the amount and your situation: cash for smaller jobs, home equity for large projects if you're comfortable using your house as collateral, or a personal loan or contractor-arranged financing if you'd rather not. Match the loan to your contractor's payment milestones.

Can I finance a remodel without home equity?

Yes. Personal loans are typically unsecured, so they don't require home equity, and contractor-arranged financing such as Acorn Finance lets you compare offers from several lenders. Rates and approval depend on your credit, so check offers before you sign the project contract.

Does pre-qualifying affect my credit?

Checking offers with a soft credit inquiry doesn't affect your credit scores, according to the CFPB's explainer on credit inquiries. A hard inquiry, which usually happens when you formally apply or accept an offer, can affect your scores. Ask each lender which type it uses at each step.

Ready to plan the numbers? Get a written remodeling estimate from HHI first, so you know exactly what you're financing: request a free written estimate. Call or text Viktor at (701) 329-9659 with your town, photos and what you want to change. Our office follows up during business hours. If you want financing, follow the separate link to compare offers through Acorn Finance and see the lender's payment schedule.