Home Equity Renovation Financing Calculator
Home equity is the most common way to fund major renovations — but HELOC, home equity loan, and cash-out refinance each have different rate structures, payment profiles, and tax treatment. Choosing the wrong vehicle can cost thousands in unnecessary interest. This calculator models all three options side-by-side for your specific balance, current rate, and renovation timeline.
| Product | Rate | Term | Monthly | Total interest | Closing | Total cost |
|---|---|---|---|---|---|---|
| Home Equity Loan | 8.50% | 15 yr | $394 | $30,901 | $0 | $30,901 |
| HELOCLowest | 9.00% | 10 yr | $507 | $20,804 | $0 | $20,804 |
| Cash-Out Refinance | 7.00% | 30 yr | $266 | $55,804 | $4,000 | $59,804 |
Total cost of borrowing = total interest over the term + closing costs. The monthly payment is the amortized payment on the financed amount alone.
Green is the lowest-total-cost path; blue are the others. The bar is total interest plus closing costs — the all-in price of borrowing your renovation amount on each product.
The cheapest total cost is not always the lowest monthly payment — a longer term lowers the monthly payment but raises total interest. The HELOC figure assumes today’s variable rate held flat, and the cash-out refinance shows only the incremental renovation borrow, not the full re-amortized mortgage. Weigh those caveats before acting.
View the TypeScript implementation on GitHub: packages/calc/src/home-equity-renovation-financing.ts · view tests
What this means
A HELOC, a home equity loan, and a cash-out refinance all hand you the same renovation dollars, but they charge for those dollars very differently. The honest way to compare them is not the monthly payment — it’s the total cost of borrowing the same amount: every dollar of interest you pay over the term plus the closing costs you pay up front. This calculator borrows your renovation amount on all three paths and reports that single number for each, then names the cheapest.
In my experience, the lowest monthly payment is the most seductive — and most misleading — figure on the page. A 30-year cash-out refinance will almost always have the smallest monthly payment, because you are stretching the same balance over the longest term; but that same stretch is exactly what makes its total interest the largest. I’ve found the shortest term you can comfortably afford usually wins on total cost, even when its rate is the highest of the three.
Two caveats I’ve seen trip people up. First, the HELOC line is variable: the rate you enter is today’s rate held flat, and if Prime moves your real cost moves with it. Second, the cash-out refinance figure here is only the incremental renovation borrow — a real refinance re-prices your entire existing mortgage, so if you locked a low rate in 2020-2021, the true cost of refinancing is far higher than this isolated comparison shows. Use the table to start the conversation, not to end it.
Worked example
A $40,000 renovation, borrowed three ways. Home Equity Loan: 8.5% fixed over 15 years, no closing costs. HELOC: 9.0% current rate over 10 years, no closing costs. Cash-Out Refinance: 7.0% over 30 years, with $4,000 in closing costs.
Home Equity Loan. $40,000 at 8.5% over 15 years amortizes to a $393.90 monthly payment and $30,901.25 of total interest. With no closing costs, its total cost of borrowing is $30,901.25.
HELOC. $40,000 at 9.0% over 10 years amortizes to a higher $506.70 monthly payment — but only $20,804.37 of total interest, because the shorter term gives interest far less time to accumulate. Total cost: $20,804.37.
Cash-Out Refinance. $40,000 at 7.0% over 30 years has the lowest monthly payment of all — just $266.12 — but the longest term piles up $55,803.56 of interest, and the $4,000 closing pushes its total cost to $59,803.56.
Result: the HELOC wins on total cost at $20,804.37 — roughly $10,097 cheaper than the home equity loan and nearly $39,000cheaper than the cash-out refinance, despite carrying the highest rate of the three. The lever is the term, not the rate: the shortest payoff borrows the money for the least total interest. The refinance’s tiny monthly payment is the trap.
Frequently asked questions
The information and tools on this website are for general educational purposes only and do not constitute financial, investment, legal, or tax advice. Consult a licensed professional for decisions specific to your situation.