HELOC for home improvement: is it worth it? The math on a $60,000 remodel

8 min read · LenderMatch Learn

A HELOC (home equity line of credit) is a common way to pay for a home improvement, and it often fits remodeling well: you draw money as each contractor bill comes due and pay interest only on what you have drawn. If the work substantially improves the home that secures the line, the interest may also be tax deductible. The trade-offs are a variable rate, possible fees, and your home as collateral.

Below: the math on a $60,000 kitchen remodel paid in three stages, how a line compares with four other ways to pay, and when it is not worth it. If a project is on your list, comparing HELOC offers from several lenders before you sign a contract shows what the money will really cost.

Can you use a HELOC for home improvements?

Yes. Once a HELOC is approved, the CFPB says you can generally spend up to your credit limit whenever you want while the line is open for borrowing, called the draw period. You typically draw with special checks or a card tied to the line.

Read the draw rules before you sign. The CFPB notes that some plans require a minimum amount for each draw (for example, $300), require you to keep a minimum balance, or require you to take an initial amount when the line is set up. A required initial draw starts interest on money your contractor may not need for months.

When the draw period ends, you enter the repayment period. The CFPB says lenders often set a schedule to repay the balance over 10 or 15 years, and some plans instead require the whole balance at once. Our guide to what a HELOC is covers the basics.

Why a HELOC fits a remodel paid in stages

Renovations are rarely paid in one check. The Federal Trade Commission’s advice on hiring a contractor is to limit your down payment (some state laws cap it) and to make payments during the project contingent on completing defined amounts of work, so that if the job falls behind, your payments do too.

A HELOC lets your borrowing follow that same schedule:

• Interest starts with each draw, not on the whole limit. Money you have not drawn costs no interest, though some lines carry an annual fee.
• Overruns are covered without a new application, up to your limit. If the job comes in under budget, you simply draw less.
• You can borrow again as you repay, during the draw period, which helps if you plan a second project.

Worked example: a $60,000 kitchen remodel

Say your contractor’s contract is $60,000, paid as a deposit, a midpoint payment and a final payment. You open a HELOC at an example rate of 8.00% (the 7.00% prime rate as of October 20, 2026, plus an assumed 1.00% margin) and draw each payment when it is due, paying interest only.

Calculated by LenderMatch at a constant 8.00%, an illustration, not a quote. Fees are not included.

Borrow the full $60,000 on day one instead, as a 15-year home equity loan at the same 8.00%, and first-year interest is about $4,720. Staging the draws saves about $1,200 in year one in this example. Real fixed rates may be higher or lower than a HELOC’s starting rate, so compare actual quotes.

Once all $60,000 is drawn, the interest-only payment at 8.00% is $400 a month. When the draw period ends, repaying $60,000 over 20 years at 8.00% is about $502 a month, or about $728 over 10 years. Our guide to what happens when the draw period ends walks through that jump.

HELOC vs other ways to pay for home improvements

Sources: CFPB HELOC booklet, Freddie Mac, Federal Reserve G.19 (released October 7, 2026; August figures are preliminary).

Rate is where the gap shows. Here is $60,000 paid off in equal payments over 5 years at each average rate, using the same 8.00% HELOC example as above:

Principal and interest, calculated by LenderMatch. The HELOC rate is variable and the figures exclude fees, so treat them as illustrations.

The lower rate comes from putting your home up as collateral, which a personal loan and a card do not. A cash-out refinance mostly makes sense when your current mortgage rate is close to today’s: Freddie Mac’s 30-year average was 7.40% for the week of October 15, 2026, and a refinance resets your whole balance at the new rate. See cash-out refinance vs HELOC or the cash-out refinance calculator. If your contract is one fixed price and you want a payment that never changes, compare a line with a loan in HELOC vs home equity loan.

Is HELOC interest tax deductible for home improvements?

It can be. IRS Publication 936 says interest on home equity loans and lines is deductible only if the money is used to buy, build or substantially improve the home that secures the loan. An improvement is substantial if it adds to your home’s value, prolongs its useful life or adapts it to new uses. Repairs that keep the home in good condition, such as repainting, do not count.

Two more tests apply: your qualifying mortgage debt must be within $750,000 ($375,000 if married filing separately), and you must itemize. If part of the line pays for the remodel and part pays other bills, only the remodel share can count. Keep contracts and invoices that tie each draw to the work. Our guide on whether HELOC interest is tax deductible has the 2026 rules and a worked example.

How much can you borrow for a renovation?

The CFPB describes a HELOC limit as a percentage of your home’s appraised value minus what you owe on your mortgage. Each lender sets its own percentage. Our guide to how much equity you can borrow shows the formula, and the home equity calculator runs it for your numbers. If your home is in Texas, the state constitution adds its own limits; see the Texas HELOC guide.

Risks of using a HELOC for a remodel

• The rate can rise. The CFPB names the prime rate as a common HELOC index. Prime was 7.00% as of October 20, 2026, after the Federal Reserve raised rates on September 16, 2026. On a $60,000 interest-only balance, each 1 percentage point adds $50 a month.
• The payment jumps later. Interest-only payments leave the full balance in place until repayment starts.
• The line can be frozen. The CFPB says HELOCs generally let the lender freeze or reduce your line if your home’s value falls or your finances get worse. A freeze mid-project could leave the last bills unfunded.
• Selling means paying it off. The CFPB says you generally must pay off a HELOC in full when you sell, so weigh the up-front costs if you may move soon.
• Fees. Some lines carry annual fees, and some lenders that pay your closing costs charge them back if you close the line within a few years. See home equity closing costs.
• Contractor liens. The FTC warns that unpaid subcontractors or suppliers may be able to file a mechanic’s lien against your home. It suggests asking the contractor, and every subcontractor and supplier, for a lien release or lien waiver before the final payment.

Above all, your home secures the debt. The CFPB’s HELOC checklist asks a blunt question: are you comfortable with the worst-case scenario, where you could lose your home?

Is a HELOC worth it for home improvement?

It tends to make sense when the project is paid in stages or its final cost is uncertain, you have equity and steady income, you want to keep a low first-mortgage rate, you can handle a payment that moves with rates, and you plan to stay in the home for years.

It may not be worth it when the project is small enough to pay from savings within months (fees can outweigh the interest saved), you may sell soon, you need a payment that never changes, or your mortgage rate is already close to today’s, where one cash-out loan can be simpler.

Frequently asked questions

Can I use a HELOC for home improvements?

Yes. Once the line is open, you can generally draw up to your credit limit whenever you want during the draw period, so you can pay a contractor as each stage of the work is done. Some plans set a minimum draw or require an initial draw when the line opens, so ask before you sign.

Is a HELOC or a home equity loan better for home improvements?

A HELOC tends to fit projects paid in stages or with an uncertain total, because you pay interest only on what you have drawn. A home equity loan tends to fit one fixed-price job when you want a payment that never changes. Many lenders offer both, so you can compare them side by side.

Is HELOC interest tax deductible for home improvements?

It can be. IRS Publication 936 says interest on a home equity line is deductible only if the money is used to buy, build or substantially improve the home that secures it, your qualifying mortgage debt is within $750,000 ($375,000 if married filing separately), and you itemize. Routine repairs such as repainting do not count as substantial improvements.

Do I have to take the whole HELOC at once?

Usually not. Most HELOCs let you draw as needed up to your limit. The CFPB notes that some plans require a minimum amount for each draw, a minimum balance, or an initial draw when the line is set up, so check the terms if you plan to borrow in stages.

Does LenderMatch check my credit?

No. LenderMatch never pulls your credit. A lender you choose may check it, with your permission, when you apply.

Compare HELOC offers for your project from several lenders →