Financing
Financing a remodel in Louisville
The most common ways Louisville homeowners pay for kitchens, additions and whole-home renovations, and how to choose between them.
Your options
Seven ways to fund a remodel
This is general information, not financial or tax advice. Rates, terms and eligibility vary; talk with your lender and tax advisor.
Home equity line of credit (HELOC)
Borrow against your equity as needed and pay interest only on what you draw.
Suits projects paid in stages. Usually a variable rate; your home secures the line.
Home equity loan
A lump sum at a fixed rate with a fixed payment.
Predictable payments. Interest starts on the full amount from day one; it's a second lien.
Cash-out refinance
Replace your mortgage with a larger one and take the difference in cash.
One loan, often at a lower rate for large sums. Replaces your current rate, which matters if it's low; closing costs apply.
FHA 203(k) renovation loan
A government-insured mortgage that rolls renovation costs into a purchase or refinance.
Limited 203(k) covers up to $75,000 of work; Standard 203(k) handles structural work with a HUD consultant. Lower down payment; mortgage insurance and more paperwork.
Fannie Mae HomeStyle Renovation
A conventional mortgage based on the home's value after renovation.
Renovation costs up to 75% of the as-completed value. Stricter credit; lender oversees draws.
Construction-to-permanent loan
One closing finances a major addition or rebuild, then converts to a mortgage.
Suits large additions. Needs full plans, budget and draw schedule; construction-period rates are higher.
Personal loan
Unsecured borrowing based on credit.
Fast, with no appraisal. Higher rates, shorter terms and smaller amounts.
Choosing the right approach
- How much equity do you have? HELOCs and home equity loans depend on it. Renovation mortgages lend against the after-renovation value instead.
- What's your current mortgage rate? If it's low, a second-lien HELOC or loan may make more sense than refinancing everything.
- How is the project paid? Design-build projects are paid in stages, which suits a line of credit or a loan with a draw schedule.
- How big is it? A bathroom and a two-story addition call for different tools.
What lenders ask a contractor for
Expect your lender to request a signed contract, a detailed scope and budget, drawings, proof of insurance and licensing, and a draw schedule tied to milestones. Because Keystone finishes design and selections before construction, those documents are ready when your lender needs them.
Help for income-qualified households
Kentucky Housing Corporation and Louisville Metro run home repair programs for income-qualified homeowners. They're aimed at essential repairs rather than remodels, but worth knowing about.
Questions
Frequently asked questions
Does Keystone offer financing?
We don't lend money ourselves. Most clients use a home equity line, home equity loan, cash-out refinance or a renovation mortgage from their own bank or credit union. We provide the design, scope and contract documents lenders ask for.
Which option is best for a large remodel?
It depends on your equity, current mortgage rate and the size and timing of the project. A HELOC suits projects paid in stages; renovation mortgages suit buyers or owners with limited equity; a construction-to-permanent loan suits major additions. Talk to a lender and a tax advisor.
Is interest on a home equity loan tax-deductible?
The IRS allows interest on home equity loans and lines to be deducted only if the money is used to buy, build or substantially improve the home that secures the loan, and only if you itemize. Ask your tax advisor how current limits apply to you.
What will my lender need from Keystone?
Usually a signed contract, a detailed scope and budget, drawings, our insurance and license information, and a draw schedule. Renovation mortgages also involve inspections before each draw.
