How Do Homeowners Pay for Home Projects? A Look at the Numbers

Every homeowner reaches that moment: the kitchen feels dated, the bathroom needs a refresh, or the backyard is begging for a deck. But before the first nail is hammered, one question tends to stall the whole project — how are we actually going to pay for this?

It turns out most Americans lean on a familiar set of options. According to data from realtor.com, homeowners overwhelmingly reach for one financing method above the rest, with personal savings and credit cards filling in the gaps. Here's how the breakdown shakes out, and what it means for your own renovation plans.

The Three Ways Homeowners Fund Renovations

When it comes to bankrolling home improvement projects, homeowners rely on three primary sources:

Home equity loans or lines of credit lead at 54%. More than half of homeowners tap into the equity they've built up in their property to finance upgrades. This makes sense in the current U.S. housing landscape, where years of home-price appreciation have left many owners sitting on substantial equity. Borrowing against that value — through either a lump-sum home equity loan or a flexible home equity line of credit (HELOC) — has become the go-to strategy for larger projects.

Personal savings account for 29%. Nearly a third of homeowners prefer to pay out of pocket, drawing on cash they've set aside. This debt-free approach appeals to those who want to avoid interest payments and keep their renovation budget firmly under control.

Credit cards round out the list at 10%. A smaller slice of homeowners charge their projects to plastic — often for smaller, faster jobs or to capture rewards points, though this route typically carries the highest interest costs of the three.

Why Home Equity Is Winning

The dominance of home equity financing isn't surprising when you consider the fundamentals of homeownership in the United States. As a mortgage gets paid down and property values climb, the difference between what a home is worth and what's owed on it grows into a powerful financial resource.

Home equity products tend to offer lower interest rates than credit cards or unsecured personal loans, precisely because the home itself serves as collateral. For a homeowner planning a $40,000 kitchen remodel or a major addition, that rate difference can translate into thousands of dollars in savings over the life of the loan. A HELOC, in particular, offers flexibility — you draw only what you need, when you need it, which suits multi-phase or open-ended projects.

That said, borrowing against your home is not without risk. Because the property secures the loan, falling behind on payments can put your home in jeopardy. Smart homeowners weigh the monthly obligation carefully before signing on.

The Case for Paying with Savings

The 29% of homeowners who fund projects with savings are playing a different game — one focused on avoiding debt entirely. Paying cash means no interest, no monthly payments, and no lien against the home. For those who've been diligently building a home-improvement fund, it's the cleanest path forward.

The trade-off is opportunity cost and liquidity. Draining a savings account for a renovation can leave a household exposed if an emergency arises, so financial advisors generally recommend keeping a healthy cushion untouched even when paying for upgrades in cash.

When Credit Cards Make Sense

Credit cards may sit at the bottom of the list, but they still have a place — especially for smaller, quick-turnaround projects like a fresh coat of paint, new fixtures, or appliance upgrades. Rewards cards can also generate cash back or travel points on purchases you'd make anyway.

The caution here is straightforward: credit card interest rates are typically far higher than home equity or savings-based options. Carrying a renovation balance month over month can quickly erode any short-term convenience or rewards benefit.

Choosing the Right Option for Your Project

There's no single "correct" way to pay for home improvements — the best choice depends on your project's size, your timeline, and your overall financial picture. As a general guide:

For large-scale renovations where preserving cash matters, a home equity loan or HELOC often delivers the most cost-effective financing. For homeowners who value being debt-free and have the reserves, personal savings offer unmatched peace of mind. And for small, fast projects you can pay off quickly, a rewards credit card can be a reasonable tool.

Whatever route you choose, the strongest strategy starts with a plan that fits both your renovation goals and your budget. The right updates today — approached thoughtfully — can add comfort, functionality, and long-term value to your home for years to come.

Thinking about a renovation and weighing your financing options? Connecting with a trusted local real estate professional or lender can help you understand how much equity you have to work with and which path makes the most sense for your goals.