Here’s something I hear at almost every first consultation: the homeowner has been thinking about this project for two, sometimes three years. They know what they want. They’ve saved Pinterest boards. They’ve measured the kitchen seventeen times. But when it comes to paying for it, they’ve done almost nothing.
That’s backwards — and it costs people real money.
Figuring out how you’re going to pay before you call a contractor changes everything. It changes what scope makes sense. It changes your timeline. It changes how much leverage you have in the conversation. And in Verona and Madison, where home values have climbed steadily, most homeowners have more financing options available to them than they realize.
Here’s what those options actually look like — and how to figure out which one fits your situation.
The Remodel Financing Options Most Dane County Homeowners Have Access To
Home Equity Loan
If you’ve owned your home for five or more years in the Madison area, there’s a good chance you’ve built up meaningful equity. A home equity loan lets you borrow against that equity in a lump sum, at a fixed rate, with predictable monthly payments.
This is the option I see work best for projects with a defined scope and a known cost — a full kitchen, a basement finish, a bathroom addition. You get the money, you pay for the project, and your payment stays the same every month for the life of the loan.
One thing worth knowing: interest on home equity loans used for home improvements may be tax-deductible. That’s worth a conversation with your accountant before you sign anything.
Typical borrowing range for this one runs $25,000 to $150,000 depending on your equity position and the lender.
HELOC
A HELOC — home equity line of credit — works more like a credit card that’s backed by your home. You’re approved for a ceiling amount, and you draw from it as you need it, paying interest only on what you’ve actually used.
This works better for projects that unfold in phases. Say you want to finish the basement this year and redo the master bath next spring. A HELOC lets you pull funds as each project gets underway rather than borrowing everything upfront.
The catch is that rates are variable. That flexibility is genuinely useful, but factor in the possibility that your payment could shift if rates move.
Personal Loan
No equity? Recently purchased? Personal loans don’t require your home as collateral at all. You apply, you get approved — sometimes within a day or two — and you receive a lump sum.
Rates run higher than equity-based options, typically somewhere between 7% and 36% depending on your credit score. But for a mid-sized project, or for someone who just bought their home and hasn’t had time to build equity, this can be the most practical path forward.
Cash-Out Refinance
This one replaces your existing mortgage entirely. You refinance into a larger loan, take the difference in cash, and use it for the renovation. Makes the most sense when you can lock in a better rate than what you’re currently paying — or when you’re planning a renovation large enough to justify the closing costs.
Less popular right now than it was a few years ago given where rates have landed, but worth looking at if your current rate is already high.
Financing Through Your Contractor
AF Construction offers financing directly through Regions Bank. You apply as part of the project conversation — no separate bank trip needed. If the balance is paid within 365 days of disbursement, the interest is waived.
For homeowners who want one point of contact and one process, this is often the most straightforward path. We handle the project. The financing is connected. You’re not managing two separate relationships.
More details on the AF Construction financing page.
Government Programs
Worth mentioning for completeness: the FHA 203(k) renovation loan lets you borrow based on your home’s projected value after the renovation is complete — not what it’s worth today. That’s useful for fixer-upper situations where equity hasn’t been established yet.
The Inflation Reduction Act also provides tax credits for energy-efficient upgrades — insulation, heat pumps, windows. If your renovation touches any of those systems, it’s worth seeing whether any portion qualifies.
How to Actually Choose
There’s no universally right answer here. What works depends on four things: how much equity you have, your credit profile, how fast you need the money, and how predictable your project costs are.
A rough starting point:
Strong equity, defined project — home equity loan. Phased work over time — HELOC. Recently purchased, smaller scope — personal loan. Large project, favorable rates — cash-out refinance. Want it simple — contractor financing.
Why I Bring This Up Before Estimates
The most common financing mistake I see is someone getting an estimate, falling in love with a scope that’s $20,000 over what they can actually access, and then spending weeks trying to scale back a project that’s already been designed.
If you know your ceiling before the first conversation, we can design the project to that number from the start. The estimate becomes useful instead of a source of stress.
Every estimate at AF Construction is line-item and specific — materials, labor, permits, contingency. That level of detail makes financing decisions significantly easier because you know exactly what you’re borrowing for.
Request a free consultation and we can walk through both the scope and the financing options that make sense for your home and your situation. We serve homeowners in Verona, Madison, McFarland, Oregon, and throughout Dane County.
Frequently Asked Questions
Can I use more than one financing option on the same project? Yes, and it’s more
Can I use more than one financing option on the same project? Yes, and it’s more common than people expect. Some homeowners use a home equity loan for the primary scope and keep a personal loan or credit line available for contingency or add-ons. As long as the combined monthly payments are manageable, there’s nothing stopping you from layering options.
How far in advance should I sort out financing before calling a contractor?
Ideally a few weeks before your first consultation. Knowing your ceiling going in changes what scope is realistic — and lets your contractor design to your actual budget rather than an imaginary one.
Will getting pre-approved affect my credit score?
A hard inquiry does create a small, temporary dip. Most lenders recommend shopping rates within a 14–45 day window — credit bureaus typically treat multiple inquiries for the same loan type within that period as a single inquiry.
Is contractor financing the same as a personal loan?
Not exactly. Contractor financing is typically offered through a specific lending partner and may have promotional terms — like the interest waiver at AF Construction if paid within 365 days — that standard personal loans don’t offer. Compare the terms carefully before deciding.
Related Reading
- Remodel Financing 101: Options and What to Ask About
- The AF Construction Remodeling Process: What to Expect
- Kitchen Remodel Timeline in Madison WI
- Basement Finishing in Wisconsin: Moisture, Comfort, and Space
AF Construction LLC serves homeowners in Verona, Madison, McFarland, Oregon, Mount Horeb, and throughout Dane County, WI. Contact us to schedule a free consultation.
