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Most people do some sort of renovations on their home every 10-15 years. For 2020, a lot of people decided to make it the year to get that ball rolling. After being stuck inside our homes for so long due to shutdowns, stay-at-home orders and necessary quarantines caused by the COVID-19 Global Pandemic, many people are ready to make their home space work more efficiently. 

Home renovations come with a cost however. Most renovations can cost anywhere from $5,000 to $50,000, which is a staggering amount of money for most people to just have on hand. Sometimes people can take out loans for home improvements, but there is another very common solution: refinancing for renovations

In the past, a lot of people opted to buy a new house and move instead of renovating, but with fewer houses on the market, more and more people are opting to spruce up their current home and add necessary things like an in-home office. Investing in your current home has significant upsides compared to purchasing a new one.  As you re-feather the nest, you’re also adding value to your home and increasing the equity. 

What is Refinancing?

Refinancing a mortgage is the process of taking your current mortgage loan and effectively selling it to another lender under different terms. Changing your interest rate or reducing the fees on the loan has the potential to save you thousands of dollars across the lifetime of your loan. Refinancing your home changes the terms, but does not remove the balance on the loan, if you want to refinance to fund a home improvement project, you’ll most likely be increasing that overall balance. 

This is called a cash-out refinance

Cash-Out Refinance for Home Renovations 

If you want to refinance and walk away with cash in hand, you’ll need to refinance  the current mortgage with one that is both less than what the house is projected to be worth, but more than you currently owe on it. 

For example, if your home is worth $100,000 and you only have a remaining balance of $60,000, and you wanted to do a $10,000 reno, you’d likely refinance your home for a loan somewhere between $70-$75,000. The $60,000 would go to paying off the balance on the old loan, and the remaining difference would be paid out to you and cover the closing costs. 

This money is considered tax-free, and is just folded into your new mortgage. 

One of the key benefits to financing your renovation with a cash-out refinance is that it doesn’t add another monthly payment to your budget. You still just have the one mortgage payment to worry about and try to balance instead of juggling the home improvement loan payment on top of it. Your new mortgage payment could just as easily be higher or lower depending on what you decide to do. But it’s still not a new payment. Which is a huge plus in its favor. 

Historically Low Interest Rates

As it stands in January 2021, mortgage interest rates are historically low! Refinancing for a lower interest rate can also lower your monthly mortgage payments. Having a few extra dollars in your account every month could help you save up for that renovation project you’ve been dreaming of. 


If you have any questions, don’t hesitate to reach out!  Give us a call! Frank B. Pallotta Law looks forward to helping our clients in Metro Atlanta navigate the closing processes associated with refinancing your home. Reach out to us with your questions. We’re here to help.