Other ways to pay for a remodel or ADU.
The options below are general education and are not necessarily offered through the HFS program above. Every loan has a different rate, payment, fee structure and risk.
What is home equity?
Home equity is the part of the home you own after subtracting the mortgage balance from the estimated property value. Example: if a home is worth $1,000,000 and the mortgage balance is $600,000, the owner has about $400,000 in gross equity. A lender will not normally let you borrow all of it.
Home equity loan
A home equity loan is usually a second loan secured by the house. You receive one lump sum and make regular payments. It may have a fixed rate, but interest normally begins on the full amount immediately.
What is a HELOC or home credit line?
HELOC means Home Equity Line of Credit. Think of it as a credit line secured by your house. During the draw period, you can borrow money as invoices become due, up to the approved limit. You pay interest on the amount drawn—not necessarily the full limit.
What is a construction loan?
A construction loan is designed to fund work in stages. The lender normally releases money in draws after reviewing progress. It may require plans, permits, a signed construction contract, budget, contingency, contractor information and inspections. Some loans convert into a permanent mortgage; others must be paid off or refinanced when construction ends.
Renovation loan
A renovation mortgage can combine a home mortgage with approved improvement funds. Programs such as Fannie Mae HomeStyle Renovation, Freddie Mac CHOICERenovation and FHA 203(k) are offered through participating lenders—not directly by those agencies.
Cash-out refinance
A cash-out refinance replaces the existing mortgage with a larger new mortgage and gives the owner cash. Compare the new rate on the entire mortgage balance. Giving up an older low rate can make this option expensive even when the project portion looks attractive.
Quick comparison
| Option | Simple explanation | Important question |
|---|---|---|
| HELOC | Use money as needed. | Is the rate variable and what happens after the draw period? |
| Home equity loan | One lump sum with scheduled payments. | Do I need all the money at once? |
| Cash-out refinance | Replace the first mortgage and take cash. | What rate am I giving up on my current mortgage? |
| Construction loan | Money released as work progresses. | What documents, inspections and contingency are required? |
| Renovation mortgage | Mortgage and construction funds in one program. | Does this lender offer the program and does my project qualify? |
What interest percentage will you pay?
There is no honest single number. Rates change with the market and with credit, income, equity, term, loan size, property and fees. Get written offers on the same day and compare APR, points, fees, monthly payment, fixed vs. variable rate and total interest.
What to prepare for a lender
- Estimated property value and current mortgage balance.
- Income, monthly debts, credit and cash reserves.
- Project scope, early plans and realistic budget.
- Design, permit and construction schedule.
- Construction contingency—not only the contract price.
Financing for your DG Builders project
Our team can help define your scope and budget. We also offer access to home improvement loan options through HFS Financial.
Explore financing optionsFor homeowners improving a property they own with an existing home on a fixed foundation. This program is not available for income-generating projects. Confirm your project's eligibility with HFS Financial.
Financing options through HFS Financial. DG Builders and HFS Financial are not lenders. Loans are made by third-party lenders, subject to approval, eligibility and lender terms. Amounts, terms and availability vary and may change.
How financing works with DG Builders