Home improvement loan calculator

It’s important to have good information when you’re making a big decision, especially when it comes to your money and your home. It’s not always easy to turn abstract concepts like interest rates and collateral into meaningful knowledge. Luckily, it’s not too difficult with the right tools. 

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We’ve created a home improvement loan calculator that you can use to estimate your real-world costs if you’re looking to upgrade your home. This information can help your family better understand what’s affordable in your monthly budget right now, along with your long-term costs.

Home improvement loans: a brief overview

There isn’t any one single “home improvement loan” that you can take out to pay for home upgrades and repairs. You can use several different financing options, which are colloquially referred to as a home improvement loan if you use some or all of the funds towards a renovation project:

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• PACE loan: Local and state governments in a few areas of the country, such as California, may allow homeowners to borrow funds for certain energy-efficient home upgrades and repay them with their property tax bill. 
• Credit card: You can finance home upgrades on an existing credit card. Another option is to open another credit card offering a zero-interest intro period on new purchases, a particularly good choice if you can repay the debt before the intro period ends. 
• Personal loan: Many people prefer an unsecured home improvement loan because it comes with less danger of losing your home if you default on the debt, although you may pay slightly higher rates based on your credit score. 
• Home equity loan: A lump-sum loan that’s perfect for a one-off renovation project. These loans are secured by your home and come with low fixed interest rates, making them more affordable — especially for larger home renovation needs. 
• Home equity investment: An HEI is structured differently from a traditional debt and may be more accessible if you have lower credit and income. You’ll repay the funds you borrow in 10 to 30 years along with a portion of your home’s equity, with no monthly payments in the interim. 
• Home equity line of credit: A HELOC is a flexible way to borrow money, especially if you’ll be working on a home improvement project for an extended period of time. It’s separated into a multiyear draw phase where you can borrow funds and make interest-only payments, followed by a repayment phase where it essentially converts to a variable-rate loan.

How to use the home improvement loan calculator

Here’s the information you’ll need to enter into the loan calculator. The more accurate the information you can provide, the better your loan cost estimates will be:

• Loan type: Choose the type of financing option you’ll be using. Different products such as personal loans and HELOCs are structured differently, and this can affect your loan costs.
• Loan amount: Enter how much you plan to borrow. Remember that some types of loans, such as HELOCs and home equity loans, may come with additional closing costs that other options, such as personal loans, don’t have. If you won’t be paying these closing costs up front, make sure to add this expense to your loan amount. 
• Interest rate: Use your loan’s expected interest rate, not its APR. (A loan’s APR includes fees, which we’ll include separately below.) Remember that variable-rate loans like HELOCs may shift over time. You can enter different rates to see how it’ll impact your cost.
• Loan term: Select how long your loan will last. Remember that some loans, such as HELOCs, have two separate phases: a draw period where lenders require interest-only payments, and a repayment period where you’ll make full payments. 
• Origination fee: Some lenders charge origination fees with certain home improvement loans. We've included some common numbers for origination fees in our calculations: 5% for a personal loan, and 0% for a HELOC.

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The calculator will return these bits of information which you can use to see how each loan option will fit in with your overall home improvement and financial plans:

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• Monthly payment: The total amount you’ll pay each month. Remember that HELOCs and other split-structure financing options may have more than one monthly payment depending on which phase of the loan you’re in.
• Total interest: The total amount of interest you’ll pay over the life of the loan. Remember that the longer you stretch out your loan term, the higher this cost will be — especially for things like HELOCs that allow you to make interest-only payments for years at a time without paying down the debt. 
• Total cost: The total amount you’ll repay, including the original amount you borrowed plus the sum of all interest and fees. If you subtract the amount you borrowed, you can see how much you’re paying for total interest and fees, which collectively make up the total financing cost of the loan. Think of it as the price tag for the loan itself.

Frequently asked questions

What can you use a home improvement loan for?

It depends on the type of home improvement loan you get. Some loan programs, such as PACE loans, can only be used for certain home improvements, like energy-efficient upgrades. Other types of home improvement loans, such as personal loans, can be used for anything you want — even if you want to split the loan funds for different uses, such as consolidating debt at the same time you borrow money to catch up on overdue home maintenance, for example. 

Can you get a home improvement loan with bad credit?

Yes, it’s possible, but it may be more difficult or expensive depending on what type of funding option you choose. Many lenders are willing to extend credit to borrowers with less-than-ideal credit scores, especially if you’re willing to use your home as collateral. This means the lender can repossess your house if you fail to repay the funds, however. 

Are there government grants for home improvements and repairs?

Yes, you may be able to find federal, state, and local government grants for home repairs and improvements to people who qualify. These are typically limited to people who have limited means to borrow money and who need repairs rather than upgrades, such as rural seniors on a fixed income who need to repair home heating systems, for example. 

Can you get a zero-interest home improvement loan?

It’s possible. Some state and local governments offer zero-interest home improvement loans to people who qualify, so check with officials in your area. Another option is to open a new credit card that offers a promotional 0% APR period for several months and repay the debt before this interest-free period ends, which may work for smaller home upgrades.

Final thoughts

You want to enjoy your home when the work is done, so it pays (pun intended) to put in some work up front to ensure you’re getting the best financing option available. This starts with analyzing your budget to see what you can easily afford each month. 

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You can narrow down your choices to the right types of home improvement loans from here. Make sure to pay especially-close attention to the different features and long-term financing costs, along with your future homeownership goals. If you’ll be selling your home, for example, you may want to avoid certain types of debts such as PACE loans that can complicate home sales, while home equity financing may be a good fit if you’re on a fixed income. 

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This strategy of looking at what you can afford today — compared to the long-term impacts of borrowing money — can help you gain confidence in making the best decision for your family, your home, and your wallet.

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