Using Home Equity Loans for Renovation: What to Know in 2025

If you’re a homeowner eyeing a renovation—say, a new kitchen or an extra bathroom—you might be wondering how to pay for it without emptying your savings. Your home’s equity could be the answer, letting you borrow against the value you’ve built up over time. At Member One, we’re here to guide you every step of the way with competitive rates and clear advice, so you can make the right decision about how to fund your next project.

This guide covers everything you need to know about home equity loans: how they work, their benefits and risks, current rates, second mortgage options, and how to qualify with Member One. Whether you’re ready to remodel or just exploring your options, this guide has the information you need to help you make an informed financial decision.

What is a Home Equity Loan?

A home equity loan lets you borrow against the equity in your home—the portion you own outright, calculated as your home’s current value minus your mortgage balance. For example, if your home is worth $300,000 and you owe $150,000, you have $150,000 in equity. With this type of loan, you can borrow a percentage of that equity as a lump sum, typically with a fixed interest rate and consistent payments over 5 to 30 years.

These loans are often great options for renovations, since they can cover the costs of big projects like a kitchen update, a new room, or energy-efficient windows—upgrades that might boost your home’s value. And if you itemize your taxes, the interest could be deductible for improvements (though be sure to check with a tax professional to be sure). It’s a practical way to invest in your property using what you already have.

Pros and Cons of a Home Equity Loan

Before you borrow, it’s worth looking at both sides. Here’s what home equity loans offer—and what to watch out for:

Pros

• Fixed interest rates: Your monthly payments stay consistent for the life of the loan, making it easier to budget.
  
  

• Lump-sum funding: Ideal for one-time renovation projects where you know your total costs upfront.
  
  

• Lower rates than credit cards: Home equity loans typically offer much lower rates—helping you avoid high-interest debt.
  
  

• Potential tax benefits: If used for qualified home improvements, the interest may be tax-deductible (check with your tax advisor).
  
  

• Can increase your home’s value: Strategic renovations often boost resale value, which can build even more equity over time.
  
  

Cons

• Your home is collateral: If you fall behind on payments, you could risk foreclosure.
  
  

• Closing costs can apply: Although Member One waives many fees, you may still face costs like appraisals or legal fees, especially with early payoff.
  
  

• Longer terms = more interest paid: Stretching your loan out over 20–30 years lowers the payment, but increases the total cost.
  
  

• Ties up your equity: Borrowing now could limit your ability to tap into equity later for other needs.
  
  

As a practical example, consider a kitchen remodel financed at 7% over 15 years—it could increase your home’s worth down the line. However, if it becomes difficult to keep up with payments, the fact is that your home is on the line, so it’s important to be sure your budget can handle the extra load.

Home Equity Loan Rates in Virginia

Rates depend on your credit score, loan-to-value (LTV) ratio, and market trends. In 2025, fixed rates for home equity loans sit between 7% and 9%, according to Bankrate. A strong credit score (700+) might get you 7%, while a fair one (620-699) could mean 9%. Most lenders limit LTV to 80%, but Member One allows borrowing up to 100% of your home’s value—a real advantage if you don’t have that much equity to work with.

Let’s take a look at some example payment terms. On a $50,000 loan at 7% over 15 years, you’d pay about $449 a month, with $30,820 in interest. An advantage of taking out a home equity loan with Member One is that we don’t apply closing costs (though attorney fees apply if you pay off early), making it a more cost-effective choice than many other lenders. To find out more about our latest rates, click here.

Understanding Second Mortgages

A home equity loan is one type of second mortgage, alongside home equity lines of credit (HELOCs). Both can help you finance renovations, but they differ in how they’re structured and work. As the name suggests, a second mortgage is any loan you take out after your primary mortgage, using your home’s equity as collateral. For homeowners looking to upgrade their property, these options offer distinct paths depending on the project’s scope and timeline.

A home equity loan delivers a lump sum with a fixed interest rate, making it a strong fit for a one-time renovation with a clear budget—like a kitchen redo. Say you borrow $50,000 at 7% over 15 years: your monthly payment would be about $449, steady and predictable from start to finish.

This consistency helps you plan around other expenses, ensuring the renovation doesn’t throw your finances off track. It’s a straightforward choice when you know exactly how much you need upfront, whether it’s for new cabinets or a full room addition.

On the other hand, a home equity line of credit (HELOC) works like a credit line with variable rates. It’s built for phased projects—imagine tackling a bathroom remodel now and adding a deck next year. You draw funds as needed up to your approved limit, and your payments adjust based on both the amount you’ve borrowed and the current rate.

For example, let’s say you borrow $10,000 at 6.1% to start your renovation. In this scenario, your monthly payment might be around $50. However, if rates rise to 7%, that could edge up to $58. Borrow another $20,000 for the next step, and it might jump to $150.

This setup works well for renovations done in stages—like a bathroom now, a deck later—but you’ll want to keep an eye on both your interest rate and the amount you’ve borrowed, so that you can always afford to make your payments.

How to Qualify & Apply with Member One

Getting approved for a home equity loan or second mortgage is easier when you know what lenders look for. Here’s what you’ll need to have in place:

• Equity in your home. Most lenders cap borrowing at 80% of your home’s value—but Member One lets you borrow up to 100%, giving you more flexibility if your equity is limited.
  
  

• A solid credit score. A score of 620 or higher is typically the minimum, but 700+ gives you access to better rates. When you have an account with Member One, you can check your score in both our Mobile App and Online Banking Platform.
  
  

• Manageable debt levels. Your debt-to-income ratio (DTI) should stay under 43%. For example, if you bring in $5,000 a month, total monthly debts—including your new loan—should stay under $2,150.
  
  

• A qualifying property. You’ll need to live in the home as your primary residence, or it must be an eligible second home—not a rental. One- to two-family homes and condos generally qualify.
  
  

How to Apply

Once you’re ready to move forward, Member One makes the application process straightforward:

1. Gather your documents. You’ll need recent pay stubs, tax returns, a current mortgage statement, and an estimate of your home’s value.
   
   

2. Start your application. Apply online at Member One’s home equity page, or call 800-666-8811 and select option 4 to speak with a loan officer.
   
   

3. Work with your loan officer. They’ll guide you through the appraisal and closing process. There are no standard closing costs—though if you pay off the loan within two years, attorney fees may apply.

FAQs: What to Know Before You Borrow

How long do I have to repay the loan?

Home equity loan terms typically range from 5 to 30 years. A shorter term (like 10 years) will save you money on interest, but it comes with higher monthly payments. Longer terms (20–30 years) offer lower monthly payments, which can be easier to manage if you’re juggling other expenses.

Can I deduct the interest on my taxes?

In many cases, yes—if the loan is used for home renovations and you itemize deductions. According to the IRS, interest is deductible on mortgage-related debt up to $750,000. But keep in mind: this provision could change after 2025. Check with a tax professional to see what applies to your situation.

Are there any fees or penalties I should know about?

Member One doesn’t charge standard closing costs, which can save you hundreds or even thousands upfront. But if you pay off your loan within two years, attorney fees apply—typically between $200 and $2,000. It’s best to budget for the full loan term unless you’re prepared to cover those early payoff costs.

What happens if I miss a payment?

A home equity loan is secured by your property, so missing payments can put your home at risk. If you’re considering borrowing, make sure your monthly budget allows room for the added cost. It’s also wise to have an emergency fund in place, just in case life throws a curveball.

How quickly can I get the funds?

Once approved, most borrowers receive funds within a few weeks. The timeline includes the appraisal, underwriting, and closing process. Member One’s team works with you directly to keep things moving smoothly—and transparently.

Can I use a home equity loan for something besides renovation?

Yes. While home improvements are the most common use, many borrowers use home equity loans for debt consolidation, education expenses, or large one-time purchases. Just remember: your home is the collateral, so it’s important to borrow wisely.

How does a home equity loan compare to refinancing?

Refinancing replaces your existing mortgage, often with a lower rate or longer term. A home equity loan leaves your primary mortgage intact and adds a second loan. If you already have a good mortgage rate and just need funds for a specific project, a home equity loan may be the more cost-effective choice.

Putting It All Together

A home equity loan or second mortgage can start your renovation, adding value and comfort to your home. Calculate your equity—say, $150,000 on a $300,000 home with $150,000 owed—then explore our competitive rates and terms, including borrowing up to your home’s full value. Weigh steady payments and possible tax perks against risks like foreclosure, and choose a lump-sum loan for a major project or a HELOC for step-by-step upgrades.

Ready to get going? Visit our home equity page or call 800-666-8811 for support.