Should I use a HELOC to pay for home improvements like a renovation, new roof, or ADU?

Why is a HELOC a good fit for home projects?

• Keeps your low first-mortgage rate instead of refinancing it away.
• Lower rates than credit cards or most personal loans, because your home secures it.
• Fast: some of the HELOCs we arrange close in days, which helps when a contractor is ready to start.
• May be tax-deductible when the money improves your home. Check with your tax professional.

What should I watch out for?

• Your home is valued as it is today. The lender won't count the value the remodel will add, so size the project to today's equity.
• Budget overruns. Add a 10% to 20% cushion to the contractor's number.
• Draw timing. Some programs require you to take most of the money at closing. If your project is paid in phases, we'll look for a program that fits.
• ADUs and big remodels: permits and timelines can stretch. Plan the payment around the longest realistic schedule.

What are the other options?

• Cash-out refinance: makes sense if your current rate is higher than today's rates.
• Renovation loans that lend on the after-repair value: helpful when you don't have enough equity today, though they come with more paperwork and inspections.
• Personal loan: fast, but usually a higher rate and a shorter term.

Example scenario (illustrative)

A couple in Long Beach wants to build a $180,000 ADU for an aging parent. Their home is worth $1.1 million with $420,000 owed on a 2.9% mortgage. At an 80% combined limit, they could borrow up to $460,000, so a $200,000 fixed-rate HELOC (with a cushion) fits comfortably, and their 2.9% first mortgage stays untouched.

Our take

For most homeowners with equity, a HELOC is my first choice for home projects. Get a real contractor bid, add a cushion, and let me show you the fixed-rate payment before you sign anything with your builder.