How to finance a remodel, and any other question you might have

(Options for Front Range Area Homeowners)

Once you’re excited about the prospects of a kitchen remodel, the next big question is usually “How do we finance it?”. Kitchen renovations can be a significant investment, but there are multiple financing options available to make your project feasible. Below we outline common ways to finance a remodel, and we’ll highlight some localized resources in Colorado that might help fund your dream kitchen.

1. Personal Savings: The simplest scenario is paying for the remodel out-of-pocket from your savings. Using savings means you won’t have debt or interest to worry about, and you avoid loan applications altogether. Of course, not everyone has enough cash on hand for a full kitchen overhaul, but even partially funding the project with savings will reduce how much you need to borrow. (It’s still wise to keep an emergency reserve – don’t drain your savings completely for a remodel.)

2. Home Equity Loan or HELOC: Many Thornton homeowners choose to finance improvements through their home equity. If you’ve built up equity in your property, you can tap into it with a home equity loan or a home equity line of credit (HELOC). These are secured loans that use your home as collateral, often offering lower interest rates than unsecured loans. A home equity loan provides a lump sum upfront at a fixed interest rate, whereas a HELOC works more like a credit line you can draw from as needed (with a variable rate). One advantage of borrowing against home equity is that interest paid may be tax-deductible when the funds are used for substantial home improvements (consult your tax advisor to see if your project qualifies). Using a HELOC gives you flexibility to borrow in stages as the remodel progresses, and you only pay interest on what you actually use. Many local banks and credit unions offer home equity financing – for example, Credit Union of Colorado advertises that their Home Equity Line of Credit can provide the funds you need to start or finish a home improvement project. Rates will depend on market conditions and your credit, but as of early 2025, Colorado HELOC rates start around prime plus a margin (roughly 7–8% APR) for borrowers with strong credit. Home equity products are a popular way to finance a kitchen remodel because they leverage the value in your home to reinvest in the home itself.

3. Renovation-Specific Mortgage Loans: Another option is a renovation loan or rehab loan, which is a type of mortgage designed to finance home improvements. These can be especially useful if you’re buying a home that needs a kitchen remodel, or if your remodel is very extensive. One well-known product is the FHA 203(k) loan, a government-backed program that allows you to combine the purchase (or refinance) of a house with the costs of renovations in one loan. FHA 203(k) loans are great for fixer-uppers: you can finance necessary kitchen updates and even live elsewhere for up to six months while the work is done. There are also conventional renovation loans (like Fannie Mae’s HomeStyle Renovation loan) which allow financing of virtually any type of improvement into your mortgage. These loans typically require a bit more paperwork and supervision – lenders will require contractor bids and will manage the disbursement of funds as work is completed – but they let you borrow based on the after-renovation value of your home, which can increase your borrowing limit for a big project. If you’re interested in this route, it’s wise to talk to local mortgage lenders who have experience with renovation financing. For instance, Front Range Mortgage (Denver) highlights that they offer FHA 203(k) and conventional rehab loans and will help borrowers find the right fit for their needs. Renovation loans can be complex, so working with a knowledgeable lender is key. Keep in mind you’ll need sufficient income and credit to qualify, and you may need a higher down payment or equity (for refinances) compared to standard loans.

4. Personal Loans or Credit Cards: If the scale of your kitchen remodel is relatively modest, you might consider an unsecured personal loan or even a promotional-rate credit card to cover costs. Personal loans for home improvement are typically fixed-rate loans from a bank, credit union, or online lender that provide you a lump sum to repay over a set term (often 3–7 years). Because they don’t use your home as collateral, interest rates will be higher than home equity loans – but they can be a good option if you don’t have much equity or prefer not to put a lien on your house. Many lenders in Colorado offer personal loans; for example, certain local credit unions or services like LightStream (an online lender by Truist) provide unsecured home improvement loans. Be sure to compare interest rates and terms, as they can vary widely based on your credit profile. Credit cards might be useful for smaller projects or finishing touches (especially if you can take advantage of a 0% APR introductory offer). However, credit cards carry higher interest if not paid off quickly, so they’re generally not recommended for financing a large remodel balance due to the risk of mounting debt.

5. Local and State Programs: Colorado homeowners have access to a few special programs and incentives that can help finance improvements, particularly if your remodel will include energy-efficient upgrades or if you meet certain income criteria. One example is the Colorado RENU Loan program – a statewide initiative in collaboration with the Colorado Clean Energy Fund and local credit unions that offers low-cost, long-term financing for energy efficiency upgrades. If your kitchen remodel involves things like new Energy Star appliances, better insulation, or solar panels, the RENU loan could help fund those at below-market rates. Similarly, the City of Thornton mentions a PowerSaver Loan Program that allows homeowners to borrow up to $25,000 for qualifying energy efficiency and renewable energy improvements, facilitated through local lenders (e.g. Bank of Colorado and Credit Union of Colorado participate). Additionally, Denver residents may be aware of the Denver Urban Renewal Authority (DURA) Home Rehabilitation programs, which provide grants or 0%–1% interest loans to low- and moderate-income homeowners for essential home repairs and upgrades. If you qualify, these can be a fantastic resource to make necessary improvements affordable. It’s worth checking for any utility company rebates or state tax credits for certain upgrades as well – for instance, installing a high-efficiency refrigerator or improving insulation might get you rebates from Xcel Energy or federal tax credits. In short, do some research on local programs; combining a standard loan with available incentives could significantly reduce your out-of-pocket cost.

6. Cash-Out Refinance: As an alternative to separate loans, some homeowners choose to do a cash-out refinance of their primary mortgage to fund renovations. This means refinancing your mortgage for a higher amount and taking the difference in cash, essentially converting some of your home’s equity into cash for the project. This can be beneficial if current mortgage rates are lower than your existing rate or if you want the simplicity of one mortgage payment. However, with interest rates currently higher than they were a couple years ago (hovering around 6–7% in 2025), a cash-out refi might not be the best choice unless your existing rate is also high or you really need a large sum. Always factor in closing costs and the fact that you’re extending or resetting your mortgage term. It’s wise to discuss with a financial advisor or mortgage professional to see if this option makes sense for your situation.

Plan Your Budget: However you finance your kitchen remodel, make sure to plan your budget carefully. Get estimates from contractors so you know how much you need. Include a contingency (typically 10–15%) for unexpected expenses – surprises can happen once you start opening up walls or replacing old plumbing. Lenders will want to ensure you can afford the loan payments, so have a clear picture of the monthly cost of any loan you take out. The good news is that by investing in your kitchen, you’re putting money back into your home. Many financing options, like home equity loans, acknowledge this by offering reasonable rates and terms since the funds are improving the asset that secures them.