Why Financing Matters More as Homeowners Choose to Renovate

Mortgage interest rates are still high, housing prices are high and the economy is a giant question mark. As a result, instead of moving away, many homeowners are choosing to stay and renovate, making functional, practical improvements to better fit their lifestyles and needs.

All those upgrades cost money, though, and homeowners must carefully consider how they'll pay for them. For many, a home equity line of credit (HELOC) can be a convenient and valuable funding option for upgrades and renovations.

The shift from moving to improving

A homeowner who purchased their first home five years ago may be delighted to see how much its value has increased in that time. But while their home value has gone up, so has the value of other homes, making the cost of moving into a dream house out of reach for many. Over the same period, mortgage interest rates have also climbed. Someone who bought their home in 2021 may have an interest rate under 3%, less than half of the average rate in 2026. That means prospective homebuyers may be looking at a higher interest rate on a higher mortgage balance, making monthly payments on a new home feel that much more daunting.

While upsizing may be less attractive due to costs, renovating has become that much more appealing for many homeowners. A recent Citizens survey found that 71% of homeowners plan to complete a home improvement project over the next two years. With the shift from moving to improving, the demand for renovation financing is expected to also climb.

Financing is becoming part of the long-term plan

Homeowners are realistic about their financing needs. Nearly two-thirds (63%) say they are likely to need some form of financing for home improvements or a home purchase over the next one to five years.

Financing is already familiar to most homeowners, with 59% saying they've used it to buy a home or make improvements. A good number, 40%, found it easy to use financing for a home project, with just 9% saying they found the process difficult.

Many homeowners still rely on savings to cover renovation costs

Although many homeowners have had positive experiences with financing and recognize its need, it's still common to use personal funds to pay for a project. More than one out of three (35%) say they would most likely use cash or savings to cover the cost of a current or future home improvement project.

Only 28% say they would most likely tap into their home equity to cover a renovation project, either with a HELOC or home equity loan. While the demand for financing is increasing, homeowners haven't fully shifted to leveraging their home equity as a funding tool.

The home equity knowledge gap

Several factors are standing in the way of homeowners using their home equity, including uncertainty about how to use it for financing. In fact, 39% of homeowners say they're aware of home equity loans and HELOCs, but don't understand how they work. For many homeowners, these funding options seem complicated, with 27% saying hidden fees are the most confusing part.

Homeowners are also wary about using their home equity, with 32% saying they would only tap into it in an emergency and 27% saying they wouldn't use it at all or don't know what it is.

Education matters as renovation demand grows

As more homeowners plan to take on renovation projects, understanding the different ways to fund them becomes increasingly valuable. The motivation for improvements and the need for financing are already there. But when home equity and financing options feel unclear, homeowners may face unnecessary delays or choose options that are less aligned with their goals.

To feel confident in their financing decisions, homeowners should look to educate themselves or find guidance that helps explain home equity financing and how the process works.

Turning home equity into lasting value

Knowing how home equity works and its benefits for funding home improvements allows you to finance your upgrades and renovations with confidence. A Citizens HELOC can give you quick and flexible access to your home equity, enabling you to cover the cost of renovations while you focus on what matters most.