How much can you borrow for a home renovation?

The amount you can borrow for a home renovation depends on the financing option you choose. If using an FHA 203(k) loan, your borrowing limit is based on FHA loan limits in your area, which in New Jersey range from $498,257 to $1,149,825 (as of 2024). Home equity loans and HELOCs typically allow you to borrow up to 85% of your home’s value, minus what you owe on your mortgage. For personal loans, the limit varies by lender but usually maxes out around $100,000. Cash-out refinancing allows you to borrow up to 80% of your home’s appraised value after renovations.

If you're planning a home remodel in New Jersey, understanding your financing options and borrowing limits is essential. The amount you can borrow depends on the type of loan you choose, your home’s value, your credit score, and lender guidelines. Let’s explore the most common renovation financing options and their borrowing limits.

1. FHA 203(k) Renovation Loan (Best for Low Down Payments)

The FHA 203(k) loan is a government-backed option that lets homeowners finance renovations as part of their mortgage.

Maximum Loan Amount: Based on FHA loan limits in New Jersey, which vary by county:
- Low-cost areas: Up to $498,257
- High-cost areas (e.g., Bergen, Essex, Morris Counties): Up to $1,149,825
Loan Includes: Home purchase price + renovation costs
Down Payment: 3.5% minimum
Best For: First-time homebuyers or those with lower credit scores who need affordable renovation financing

2. Fannie Mae HomeStyle Renovation Loan (Best for Conventional Borrowers)

A HomeStyle Renovation Loan allows you to borrow based on your home’s future value after renovations.

Maximum Loan Amount: Up to 97% of the home’s future appraised value
Best For: Homeowners who want a conventional loan option with flexible renovation funding

3. Home Equity Loan or HELOC (Best for Homeowners with Equity)

If you already own a home with significant equity, a home equity loan or home equity line of credit (HELOC) can provide funds for renovations.

Borrowing Limit: Typically 75-85% of your home’s current value, minus your mortgage balance
Example: If your home is worth $500,000 and you owe $250,000, you may borrow up to $175,000
Best For: Homeowners who want to access cash without refinancing

4. Cash-Out Refinance (Best for Large Renovation Budgets)

A cash-out refinance replaces your existing mortgage with a larger one, giving you the difference in cash for renovations.

Borrowing Limit: Up to 80% of your home’s appraised value after renovation
Best For: Homeowners who can secure a better mortgage rate while financing renovations

5. Personal Loans (Best for Small to Mid-Sized Projects)

For homeowners who don’t want to use their home as collateral, a personal loan is a fast and flexible financing option.

Borrowing Limit: Typically $5,000 to $100,000, depending on income and credit score
Best For: Small home upgrades, like bathroom renovations or new flooring

Choosing the Right Renovation Loan for Your Budget

Your borrowing limit depends on your home’s value, equity, and creditworthiness. If you’re looking for affordable renovation financing in New Jersey, options like FHA 203(k) loans, home equity loans, and cash-out refinancing can help you fund your project without draining your savings.

Need help financing your home remodel in New Jersey? Contact us today to explore your best borrowing options!