09 Aug What’s the best way to pay for a major home renovation?

Q. I just turned 60 and wanted to do a major renovation to the house. The house is almost paid for. Is there any benefit in taking a second mortgage or home equity loans to pay for the repairs?
— Considering

A. Happy birthday.

And congrats for almost having your home paid off.

That’s a great position to be in as you think through your renovation options, said James Suazo, a chartered financial consultant with Baron Financial Group in Fair Lawn.

A second mortgage is a general term for any loan that uses your home as collateral when you already have a preexisting primary mortgage, he said.

This includes home equity loans and home equity lines of credit (HELOC).

Suazo said a home equity loan allows you to borrow a lump sum of cash which you receive upfront. From the beginning, you pay interest on the loan and start paying it back.

A HELOC works more like a credit card, where you’re approved for a certain amount and only owe interest and payment on what you actually use, he said. So if you are approved for $100,000, but only use $10,000, you only owe $10,000 plus interest.

It is important to note that HELOCs typically have two repayment structures when applying, he said.

“You can elect to pay interest only, or interest and principal. Selecting the interest and principal will have a higher monthly payment, but the balance owed at the end of ten years will be less than paying interest only, he said, noting that a typical HELOC is open for ten years.

A HELOC is often a more flexible option since it gives flexibility and peace of mind, knowing it’s there if you need it, he said.

“You only pay interest on what you draw, which might better suit renovation costs that come in overtime,” he said. Not sure what your retirement status is, but it’s often easier to qualify for a HELOC while you’re still working, since lenders lean heavily on income, and that can become more limited in retirement.”

Interest on either option may still be tax deductible if the money goes toward improving the home, though that depends on your personal tax situation. You can discuss this with your accountant, he said.

“It’s hard to make a blanket recommendation without knowing your full financial picture,” he said. “Consider working with a financial professional to determine which option fits your goals and retirement timeline.”

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This story was originally published in August 2026. 

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.