Something in your house needs fixing and you do not have the cash. The right way to pay for it depends heavily on two things: how much you need, and how much equity you have. Get those two straight and the choice usually makes itself.
Here is every realistic option, what it costs as of mid-2026, and who each one actually suits.
Start here: how much equity do you have?
This question eliminates most of the options immediately, and it is the reason so much generic advice is useless to recent buyers.
Home equity loans and HELOCs — the cheapest mainstream borrowing available to homeowners — generally require you to stay under 80% to 85% combined loan-to-value. If you bought with 0% down on a VA or USDA loan, or 3.5% down on FHA, you have essentially nothing to borrow against for the first several years. Every article recommending a HELOC for repairs is quietly assuming you have owned the home for a while.
If that describes you, your realistic options are a renovation mortgage (if you are still buying), a government repair program (if you qualify), or unsecured borrowing (if the amount is small).
What things cost right now
Approximate national averages as of August 2026, for orientation rather than as quotes:
- 30-year fixed mortgage: about 6.65%
- 15-year fixed mortgage: about 5.95%
- Home equity loan: roughly 8.1% to 8.3% depending on term
- Personal loan: about 12.4% average, with the strongest credit seeing offers near 8%
- USDA Section 504 repair loan: 1% fixed for 20 years, for those who qualify
The spread between the top and bottom of that list is enormous. On $40,000 over ten years, the difference between 1% and 12.4% is more than $25,000 in interest. It is worth spending real effort to qualify for the cheapest tier you can reach.
If you are still buying the home
This is the best position to be in, because renovation mortgages solve the equity problem by definition — they underwrite against what the home will be worth after the work, and the repair money is built into the purchase loan.
- FHA 203(k) — 3.5% down, credit from 580. Limited version caps at $75,000 of work; Standard has no cap beyond county FHA loan limits. Owner-occupants only. The catch is mortgage insurance that lasts the life of the loan at low down payments.
- HomeStyle (Fannie Mae) and CHOICERenovation (Freddie Mac) — 3% to 5% down, practical credit floor around 620. Renovation capped at 75% of the lesser of price-plus-renovation or as-completed value. Allows luxury work, second homes, and rentals, and the PMI is cancellable.
- VA alteration and repair financing — 0% down, no VA-set cap, but very few lenders offer it.
- USDA Section 502 purchase with rehabilitation — up to $35,000 in non-structural repairs rolled into a rural purchase, financed against as-improved value.
If you are buying a home that needs work, use one of these. Buying first and figuring out repairs later is how people end up paying 12% for something they could have financed at 6.65%.
If you already own the home
Home equity loan
A fixed-rate second mortgage against your equity. Predictable payments, rates around 8%, low or no closing costs, and it leaves your first mortgage untouched — which matters enormously if you locked a low rate years ago. Best for a defined project with a known cost. Requires equity you may not have.
HELOC
A revolving line you draw against as needed. Useful when costs are uncertain or the work happens in phases. The tradeoff is a variable rate, which is real risk if you will carry the balance for years. Same equity requirement.
Cash-out refinance
Replaces your entire first mortgage with a larger one. This is the worst fit for most people who bought before rates rose — you would be repricing your whole loan upward to access cash, and paying closing costs on the larger balance. It can make sense if your current rate is already at or above market, or for VA borrowers, who can sometimes reach 100% LTV on a cash-out where conventional caps at 80%.
Government and local programs
Worth checking before you borrow at market rates. USDA Section 504 offers 1% loans and grants to very-low-income rural homeowners. FHA Title I property improvement loans technically still exist with a $25,000 limit, but the program has shrunk to roughly 30 active lenders nationwide and the limit has not changed since 1992 — do not build a plan around it. Locally, CDBG- and HOME-funded programs run through city and county housing departments commonly offer deferred forgivable loans at 0% for households under 80% of area median income, and weatherization assistance is available at up to 200% of the federal poverty guidelines.
Unsecured and contractor options
Personal loans require no equity, no appraisal, no lien, and no contractor oversight, and fund in days. That flexibility is the entire case for them. The cost is the rate — averaging over 12% — and short terms of three to seven years that make monthly payments high. Rational for a $5,000 to $15,000 urgent repair when speed matters; expensive for a $50,000 renovation.
Contractor financing is the highest-variance option and deserves the most scrutiny. Promotional “same as cash” offers are useful only if you clear the balance before the promotional period ends — many are structured with deferred interest that retroactively charges the entire accrued amount on the original balance if any amount remains. Non-promotional contractor financing often runs into the high teens, and the rate is frequently subsidized by a dealer fee baked into the project price.
One practical defense: always ask for a cash price alongside the financed price. If the “0% financing” job quotes 15% higher than the cash job, you are paying the interest either way.
A simple decision path
- Still buying? Use a renovation mortgage — 203(k), HomeStyle, CHOICERenovation, VA, or USDA 502.
- Own the home and very-low-income in a rural area? Check USDA Section 504 first; 1% money is worth the paperwork.
- Own the home and under 80% of area median income? Check your county housing department and state HFA for forgivable repair loans before borrowing commercially.
- Have equity and a defined project? Home equity loan. Uncertain or phased costs? HELOC.
- No equity, small and urgent? Personal loan — and shop at least three lenders, since the spread between average and best-offer rates is wide.
- Offered contractor financing? Get the cash price too, and read the deferred-interest terms before signing anything.
Frequently asked questions
What is the cheapest way to pay for home repairs?
If you qualify, USDA Section 504 at 1% is the cheapest borrowing available, followed by local forgivable loans through city or county housing programs. For most homeowners with equity, a home equity loan around 8% is the cheapest mainstream option. Renovation mortgages are cheapest for buyers, since they carry mortgage rates rather than consumer-loan rates.
Can I get a home equity loan right after buying?
Usually not. Lenders generally cap combined loan-to-value at 80% to 85%, so a buyer who put down 3.5% or less has no borrowable equity for several years. This is the single biggest reason recent buyers should finance repairs through a renovation mortgage at purchase rather than planning to borrow later.
Is contractor financing a good deal?
Sometimes, but read carefully. Promotional 0% offers often carry deferred interest that charges all accrued interest retroactively if any balance remains when the promotion ends. The financing is also frequently paid for by a dealer fee built into the project price, so always request a cash price for comparison.
Should I do a cash-out refinance to pay for repairs?
Rarely, if you locked a mortgage rate below today’s roughly 6.65%. A cash-out refinance replaces your entire first mortgage, so you would reprice the whole loan upward to access a relatively small amount of cash. A home equity loan or HELOC leaves the first mortgage alone.
Do FHA Title I home improvement loans still exist?
Technically yes, with a $25,000 limit for single-family property improvements. In practice the program has shrunk from over 1,000 participating lenders in the 1990s to roughly 30, and the limit has not been raised since 1992. Worth a call if a local bank participates, but not something to plan around.