Kitchen Remodel Financing: How To Finance a Kitchen Renovation

Remodeling your kitchen is an exciting journey. The prospect of a revitalized space that perfectly aligns with your vision, taste, and lifestyle is a dream for many homeowners. The only thing that comes in the way of this dream is the high renovation cost. After all, kitchen remodeling isn’t exactly cheap. However, if you’re smart enough to finance kitchen remodel through the best loan type out there, your kitchen makeover will become a reality easily.

What are your loan options to finance kitchen remodel?

For a large-scale kitchen renovation, you have to first decide whether you want to apply for a secured loan or an unsecured one.

Secured loans are backed by assets, such as a home or car, which serve as collateral for the loan. Now the catch is that if the borrower defaults on the loan repayment, the lender can seize the collateral in a bid to recoup the money. On the other hand, unsecured loans do not require any collateral. Such types of loans are based solely on the borrower’s creditworthiness. Because of the added risk for the lender, unsecured loans often come with higher interest rates.

Although secured loans offer more favorable terms for the borrower, they carry the risk of losing the collateral or foreclosure in case of a default in repayments.

What is the best way to decide on a kitchen remodel loan?

Remember that before deciding on a loan type, it’s essential to assess your financial situation, consider the interest rates and terms offered by different loan lenders, and make sure you can comfortably manage the loan payments. It’s best to consult with a financial advisor or loan specialist to determine the most suitable option for your needs.

If you need help deciding on the best loans for your kitchen remodeling, Kukun Home Lending Tool will make your choice easier. You can learn about the different types of financing available on the market, including home equity loans, mortgages, and personal loans. You can then make an informed decision for your home improvement project.

Which are unsecured loans to finance kitchen remodel?

Since these loans are without collateral, the lender is at greater risk and hence offers smaller loan amounts with higher interest rates and shorter loan terms.

Credit cards

If you have an excellent credit score (800 and up), you probably qualify for $10,000 of credit at a favorable interest. This loan amount is sufficient for a small kitchen remodel – whether it’s installing new kitchen countertops, kitchen floors, and kitchen lighting.

Pros	Cons
It’s an easy way to finance kitchen remodel	You will owe a lot of interest on the principal amount if you default
It’s quick funding and doesn’t involve a long loan application process	The high interest is not tax-deductible

Personal loans

An unsecured personal loan is a great option if you want to spend $10,000 to $30,000 to pay for a kitchen remodel. The interest rates and terms of personal loans vary at different banks and credit unions.

A personal loan is one of the best loan options for a kitchen remodel. This type of loan is especially beneficial if you don’t have enough home equity or you don’t want to use your home or assets as collateral. But, you need to be prepared for a higher interest rate.

The lower your credit score is, the higher will be your loan interest rate. The good news is that this kind of unsecured loan is possible even with a bad credit score.

Pros	Cons
Has an easy loan application process	Higher interest rates
No processing fees, origination fees, or closing costs	No tax benefit

Which are the secured loans to finance kitchen remodel?

Such loans are ideal if you’re planning to spend more than $30,000 on your kitchen upgrades. Since the loan involves home equity, the borrower can get a higher loan amount at a lower interest rate, longer payoff terms, and tax-deductible interest (if you’re using the funds for improving your house).

Home equity loans

A home equity loan is like a second mortgage which lets you borrow a lump sum of cash against the equity in your home.

Usually, it comes with a longer loan term, fixed rates, and an amortization schedule for your monthly repayment plan.

Your original mortgage stays intact. And, you’ll be paying two monthly payments — one for the mortgage and one for the home equity loan.

Pros	Cons
Better interest rates than unsecured loans in case of a flawless credit report	The bank may foreclose on you in case of loan default

Home equity line of credit (HELOC)

A HELOC loan is a flexible way to finance your kitchen remodeling. This revolving line of credit uses your home to secure the loan. Instead of a lump sum amount, you get a line of credit that you can tap into over time. And, you only pay interest on the amount of money you use up during a ‘draw period’. Once this period ends, you get a specified number of years to pay back your loan. Usually, it’s 10 to 15 years depending on your loan agreement. A HELOC offers an adjustable or variable interest rate that can rise according to market rates. Keep in mind that you’ll need a good to excellent credit score and also enough equity in your home. It would require you to give a statement of your home appraisal and credit report. Usually, a HELOC lender will require a combined loan-to-value (LTV) ratio of 70% or lesser.

Pros	Cons
You only pay interest on the amount you borrow	It’s a riskier option as rates fluctuate
A good option if you have a long-term renovation plan	The loan lender may foreclose your property if you default on the repayments

Cash-out refinance

A cash-out refinance is beneficial if you take out a new loan at a better rate and use it to pay off your old mortgage. That way, you can pocket the balance amount of money and invest it in your kitchen renovation.

Pros	Cons
You can repay the loan over 30 years or more	This financing option is good only as long as you can get a substantially lower interest rate than your current mortgage rate

What are the steps to finance a kitchen remodel project?

Obtain a cost estimate: Before proceeding with the kitchen remodel, it’s essential to obtain a reliable cost estimate. The amount you plan to spend will impact your payment options, so consider gathering a few quotes and establishing a renovation budget first.
Pre-qualify for a loan: Once you have the cost estimate, it’s advisable to pre-qualify for a loan. This step allows you to determine the loan amount and interest rate you could potentially be approved for. Pre-qualification won’t affect your credit score, enabling you to seek offers from multiple lenders without any negative impact.
Compare lenders: In case you receive similar loan offers from different lenders, take the time to compare various features. Evaluate factors such as funding time, repayment term options, and whether they provide credit-building assistance. This comparison will help you make an informed decision and break any ties between competing offers.
Submit your loan application: To streamline the loan application process, gather necessary documents such as W-2s, paystubs, and bank statements beforehand. Keep in mind that when you submit the application, the lender will perform a hard credit check, causing a temporary dip in your credit score. Expect to receive a decision within a day or two after applying.

What are some useful kitchen remodel financing tips?

Here are some important financing tips that will make your kitchen remodeling seamless and tension-free:

It’s a good idea to set aside about 20% of your home renovation budget for sudden, unexpected costs.
Sit down with your contractor before planning the kitchen remodel.
Try to minimize your renovation cost and maximize your return on investment.
Plan upgrades that will increase your house’s value. Consult an experienced real estate agent if you need help.
Always check your chosen financing option for hidden costs, fees, or a prepayment penalty.

Key takeaway

Having an understanding of how to finance a kitchen remodel will enable you to bring your dream kitchen to life. Prior to commencing the project, ensure to establish a budget, determine your affordability, and approach the kitchen renovation with a well-defined financial strategy.

FAQs

How much is the average kitchen remodel budget in the United States?

The average kitchen remodel costs around $12,600 to $77,930 – depending on the scope of renovation and kitchen size. A small-scale kitchen remodel can cost as little as $4,000 while a high-end kitchen remodel can go much higher than the national average.

What are the steps for a kitchen renovation?

When remodeling a kitchen what comes first

Demolish the existing space if required: Remove cabinet doors, doorway and window trim, and paneling from walls. Disconnect power and remove appliances, covering exposed wires.
Hire the right contractors: Choose licensed, bonded, and insured professionals with necessary permits and references.
Get written payment plans and contracts: Pay no more than 10% upfront, 50% halfway, and the balance upon completion.
Replace dated plumbing: Replace leaking pipes or faulty shutoff valves while walls are open.
Replace kitchen wiring and install new lighting: Upgrade wiring to code and consider recessed lighting, pendant lighting, or accent lighting.
Hang the drywall: Properly apply joint compound (mudding) after the electrician and plumber finish their work.
Paint kitchen walls and ceiling: Use quality brand paint and the right finish for easy cleaning.
Install kitchen flooring and baseboards: Consider hardwood, cork, bamboo, or recycled carpeting.
Hang the kitchen cabinets: Have a professional installer ensure correct installation.
Install the kitchen countertop: Measure with cabinets in place and choose suitable material based on lifestyle.
Install the backsplash: Properly install tile backsplash for a complementary color in the kitchen.
Get the right cabinet hardware: Choose pulls and knobs that complement cabinets and kitchen style.
Install kitchen appliances: Have the electrician and plumber install appliances properly and check for any issues before final payment.

Are there government-backed improvement loans for kitchen remodeling?

Yes, another option for funding home improvements is through government loans or federal programs. The U.S. Department of Housing and Urban Development (HUD) offers the Section 203(k) program, which enables individuals to obtain a new mortgage or refinance their existing one while incorporating the expenses of home renovations into the loan. Although there are restrictions on how the funds can be utilized, they typically cover common upgrades such as bathroom and kitchen renovations.

The best loans to finance kitchen remodel was last modified: June 25th, 2025 by Ramona Sinha

Written by Ramona Sinha. October 27, 2020

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.

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Comments

October 2, 2024 Log in to Reply
anthonygriffith63@yahoo.com
Navigating federal programs for kitchen remodeling loans can feel like wading through a bureaucratic swamp. The application process is so convoluted that it seems designed to deter rather than assist homeowners. You’re bombarded with endless forms, obscure eligibility criteria, and fine print that reads like a legal thriller—minus the thrill.