Home equity vs. renovation loans

A home equity loan is a second mortgage based on your home's current value. You keep your first mortgage, get the money up front and repay it on a set schedule.

A renovation loan rolls the cost of the work into a mortgage. Programs such as FHA 203(k) and Fannie Mae HomeStyle can base the loan on the home's expected value after repairs, which can help when you don't have much equity yet.

• You already have solid equity in the home
• You have a clear budget and a contractor lined up
• You want to keep your current first mortgage and its rate
• You'd like a fixed payment you can plan around
• You want flexibility in how and when you pay contractors

• You're buying a home that needs work
• You have little equity, but the project will add value
• The project is large and you want lender oversight of the work
• You're comfortable with inspections and staged payouts

With a home equity loan, you get the funds at closing and pay your contractor as you agree. With a renovation loan, the lender usually reviews contractor bids, then pays out the money in stages as the work is inspected. That oversight can protect you, but it takes more time and paperwork.

Renovation loans are often used when buying, while a home equity loan is for a home you already own.

CapCenter offers fixed-rate home equity loans from $50,000 to $250,000 on single-family primary residences and second homes, with 15-, 20- and 30-year terms. They come with ZERO Closing Costs (restrictions apply; see Offer details). The most you can borrow depends on the loan type and purpose, and a loan consultant can tell you yours.

CapCenter doesn't offer renovation loans. If you have equity today, a loan consultant can compare a home equity loan with a cash-out refinance.

• How much equity do I have today?
• What will the project really cost, with a cushion for surprises?
• Will the work raise the home's value, or is it mainly for my own enjoyment?
• How much paperwork and oversight am I comfortable with?