Using a credit card to finance your home renovation project might not be a smart idea

Home improvement is growing in popularity, with the number of homeowners beginning new projects this year set to rise by 6.7 percent according to the Joint Center for Housing Studies at Harvard University. As more owners look to improve their homes, it might pay to consider how they fund their new renovation projects.

According to a new survey of more than 3,000 respondents conducted by LightStream, which is a lending subsidiary of SunTrust Banks, around a third of homeowners who make at least $100,000 a year plan to use their credit card to pay for their renovation projects. The percentage is increasing too, with 32 percent of homeowners saying they will use their credit cards, compared to just 26 percent one year ago.

Many homeowners say they’ll use their credit card, even though they will pay off the balance as soon as it’s due. That’s because they want to get rewards such as airline miles from using them, Todd Nelson, business development officer at LightStream, said in a statement. But those who’re unable to pay off their credit card right away should consider alternative funding options, said Shomari D. Hearn, a financial planner with Palisades Hudson Financial Group in Fort Lauderdale, Florida.

“It’s fine to tap savings or use a home-equity loan or line of credit, but I don’t think it’s a good idea to use credit cards for home improvements,” he told “Interest rates on credit cards tend to be in the double digits, plus it’s personal debt and the interest is not tax-deductible.”

With recent home price increases of 5.5 percent in 2016, the number of mortgage holders who now have tappable equity is at 39.5 million, according to Black Knight Financial Services, a real estate data firm. With a HELOC—a home-equity line of credit—the interest may be tax-deductible and there are no upfront frees. A cash-out refinance is another option, where borrowers refinance for more than what they owe on the property and then take the difference out in cash.

For either a HELOC or cash-out refinance, homeowners do need to factor in added fees, such as refinance fees from the application, which start at $475 at Bank of America. There are also extra processing fees and closing costs to factor in too.

Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at

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