What’s the Best Way to Pay for a Remodel in Sacramento?

When it comes to remodeling, most homeowners get excited about the fun stuff first: new cabinets, a bigger bathroom, or finally opening the kitchen into the living room. But here’s the part that can make or break the whole project: how you pay for it.

The wrong financing can weigh down a remodel just as much as bad design. High payments, ballooning interest, or a loan structure that doesn’t match your project can leave you frustrated before the paint is even dry. The right funding plan, on the other hand, works hand-in-hand with your remodel: it fits your timeline, aligns with California’s rules, and keeps you confident about the investment you’re making in your home improvements.

The good news? Sacramento homeowners have plenty of ways to pay, from cash and home equity tools to renovation-specific loans and energy-focused programs. The key is knowing when each one makes sense, and when to steer clear. Here are the financing moves we've seen work well for Sacramento renovations.

Table of Contents

• The Quick Map: All the Ways People Pay (and When to Use Each)
• HELOC: Flexible Draws for Phased or Evolving Projects
• Home Equity Loan: Fixed Sum, Predictable Payments
• Cash-Out Refinance: When Resetting Your Mortgage Makes Sense
• Renovation Mortgages: FHA 203(k) and HomeStyle
• Unsecured Personal Loans & Contractor Financing: Fast but Pricier
• Payment Reality in California: How Financing and Contracts Work Together
• Frequently Asked Questions

The Quick Map: All the Ways People Pay (and When to Use Each)

Before we give each their own section, here’s the quick TL;DR. Most Sacramento remodels get paid for in one of these ways.

Cash

The simplest option, with no interest, no lenders, no strings. Great if the project is modest and you’ve saved ahead. The downside? It drains liquidity, so it’s not always wise to empty the emergency fund for a bathroom vanity.

HELOC (Home Equity Line of Credit)

This method works like a credit card secured by your house. Flexible draws are perfect if your remodel has phases or unpredictable costs (like a kitchen where surprises pop up behind the walls). Payments are interest-only during the draw period, but rates can fluctuate.

Home Equity Loan

A fixed lump sum with a predictable monthly payment. Ideal for defined projects like a bathroom pull-and-replace, siding replacement, or roof upgrade. Less flexible than a HELOC, but easier to budget.

Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a bigger one, giving you cash for the remodel. Smart if today’s rates make sense and you’re ready for a full reset of your mortgage term. Less appealing if your current rate is much lower than what’s available now.

Renovation Mortgages (FHA 203(k), Fannie Mae HomeStyle)

These bundle purchase or refinance with renovation funds. Great for buying a fixer-upper or rolling a remodel into a new mortgage. They do come with extra paperwork, inspections, and timelines to manage.

Unsecured Personal Loans / Contractor Financing

Fast, no-equity-required options. They work for smaller projects, but interest rates are usually higher and terms are shorter. Always compare against other options before signing.

One of the first steps in your remodeling budget journey is researching the actual local costs. Start with our cost guide here.

HELOC: Flexible Draws for Phased or Evolving Projects

A Home Equity Line of Credit (HELOC) works like a credit card backed by your house. You get approved for a credit limit, then draw funds as you need them during the remodel. You only pay interest on what you use, and many homeowners like the flexibility when project costs shift midstream.

Why It Works for Sacramento Remodels

• Perfect for phases. A kitchen remodel today, a bathroom renovation next year, this is your fit. You can fund each stage as it happens, whether you’re updating layouts or incorporating the latest 2025 kitchen trends for Sacramento homes.

• Covers surprises. Remodels sometimes uncover “uh-oh” moments (plumbing, wiring, dry rot). A HELOC gives you wiggle room without reapplying for a new loan.

• Interest-only payments (at first). During the draw period, payments are lighter, which can help manage cash flow.

What to Watch Out For

• Variable rates. Payments can rise if interest rates climb. That’s fine for a short project, but less fun over the long haul.

• Equity and credit required. You’ll need solid equity in your home and a decent credit profile to qualify.

• Discipline matters. Easy access to funds makes overspending tempting if you don’t stick to the budget.

Home Equity Loan: Fixed Sum, Predictable Payments

A home equity loan is the “set it and forget it” cousin of the HELOC. Instead of drawing as you go, you get one lump sum up front with a fixed interest rate and fixed monthly payments. They’re often the simplest way to pay for medium-sized jobs, like remodeling a bathroom, siding replacement, or even a well-defined kitchen remodel.

Why It Works for Sacramento Remodels

• Budget certainty. You know exactly what you owe each month, which makes planning easier.

• Great for defined projects. Pull-and-replace bathroom, new siding, or a straightforward kitchen update? A lump sum works beautifully.

• Longer terms than personal loans. Payments spread out over many years instead of being crammed into 2–5 years.

What to Watch Out For

• Less flexibility. Once the money’s disbursed, you can’t go back for more. If the project scope grows, you’ll need a new plan.

• Upfront interest. You’re paying interest on the whole amount, even if your contractor doesn’t need all the money immediately.

• Equity-dependent. Just like a HELOC, you’ll need solid equity in your home.

Cash-Out Refinance: When Resetting Your Mortgage Makes Sense

A cash-out refinance remodel works by replacing your existing mortgage with a larger one, and you pocket the difference to fund your remodel. It can be a smart option if you’re already planning to refinance and you’re comfortable resetting the clock on your mortgage term.

Why It Works for Remodels

• One payment, one loan. Instead of juggling a mortgage plus a HELOC or personal loan, everything’s rolled into a single monthly payment.

• Potentially lower rates than unsecured loans. Since it’s tied to your home, rates are usually more competitive than personal loans or credit cards.

• Large-scale projects covered. Great for major remodels like full-home overhauls or large home additions.

What to Watch Out For

• Closing costs. Refinances come with fees, so the math only works if your project is big enough to justify them.

• Rate trade-off. If your current mortgage rate is much lower than today’s rates, a cash-out refinance can cost more in the long run.

• Longer payoff timeline. Restarting a 15- or 30-year term may not be ideal if you were close to paying off your home.

Renovation Mortgages: FHA 203(k) and HomeStyle

Sometimes homeowners don’t just need remodel financing, they need a loan that bundles the remodel into their mortgage. That’s where FHA 203(k) loans and Fannie Mae’s HomeStyle renovation loan come into play.

Why They Work for Remodels

• Buy + remodel in one step. Perfect if you’re buying a fixer-upper in East Sacramento or Arden-Arcade and want funds built into the mortgage.

• Refinance + remodel. If you already own, you can roll renovation costs into a new loan.

• Wide project coverage. Kitchens, bathrooms, additions, and even structural repairs can be included.

What to Watch Out For

• More paperwork. These loans require approved contractors, detailed scopes of work, and inspections at key milestones.

• Timeline management. Funds are released in draws, which means your contractor needs to stay aligned with lender checkpoints.

• Upfront planning. Because lenders need detailed bids and plans, you’ll spend more time on prep before construction starts.

Unsecured Personal Loans & Contractor Financing: Fast but Pricier

Not every homeowner has a pile of equity ready to tap. That’s where unsecured options step in. A home improvement loan in Sacramento (basically a personal loan used for remodeling) or direct contractor financing can get you money quickly without tying it to your mortgage. These tools are best for smaller jobs, like a pull-and-replace bathroom or targeted kitchen upgrades, where you need fast cash and don’t want to refinance or tap equity.

Why They Work for Remodels

• Fast approval. Some lenders approve within days, helpful if you need to jump on a time-sensitive project.

• No equity required. Good for newer homeowners or those who haven’t built up much equity yet.

• Simple structure. Fixed payments, fixed terms, no lien against your house (in most cases).

What to Watch Out For

• Higher rates. Because these loans aren’t secured by your home, interest rates are often higher than HELOCs or home equity loans.

• Shorter terms. Most personal loans run 2–7 years, which means higher monthly payments compared to spreading costs over 15–30 years.

• Contractor financing pros and cons. Some builders offer financing through third-party lenders. It’s convenient, but always compare against outside offers to avoid overpaying.

Payment Reality in California: How Financing and Contracts Work Together

Even with the right financing lined up, California has specific rules for how money flows during a remodel. Homeowners should understand these basics before signing a contract.

Down Payment Rules

By law, California caps home improvement contract down payments at $1,000 or 10% of the contract price, whichever is less. If a contractor asks for more up front, that’s a red flag.

Progress Payments

Payments during the project must line up with actual work completed or materials delivered. In other words, you shouldn’t be paying 50% of the job cost before demo even starts. This protects you from overpaying for unfinished work.

Why It Matters for Financing

• HELOCs and renovation loans fit well. Because they release funds in stages, they align naturally with California’s progress payment rules.

• Home equity loans or cash-out refinances. You’ll need to work with your builder to structure payments so that funds are drawn down responsibly.

• Personal loans. Since you get the full lump sum up front, it’s on you to manage the cash carefully.

Bottom line: California’s contract rules are there to protect you. Pair them with a funding option that matches your project’s scope and timeline, and you’ll keep both your remodel and your budget on track.

Frequently Asked Questions About Financing Home Renovations

What’s the best way to pay for a remodel in Sacramento?

It depends on your situation. Many homeowners use HELOCs or home equity loans, while others opt for cash-out refinances, renovation mortgages, or personal loans. Energy-focused financing like GoGreen or PACE may fit certain upgrades.

How do I know if I should use a HELOC or a home equity loan?

A HELOC works well if your project will be done in phases or you want flexibility. A home equity loan is better if your scope and costs are clearly defined from the start.

Can I use a personal loan for a remodel?

Yes, especially for smaller projects. Personal loans (often marketed as home improvement loans in Sacramento) are quick and don’t require equity, but they usually carry higher interest rates and shorter terms.

What’s the deal with contractor financing?

Some contractors offer financing through third-party lenders. It’s convenient, but always compare offers. Contractor financing pros and cons depend on the terms. Sometimes it’s competitive, sometimes not.

Is GoGreen Home financing available in Sacramento?

Yes. GoGreen Home financing in California supports energy-efficiency upgrades like HVAC, insulation, and windows. It’s unsecured and doesn’t require home equity.

Should I consider PACE financing in Sacramento?

PACE financing ties repayment to your property tax bill. It can work for energy or resilience upgrades but may complicate resale or refinancing. Proceed cautiously and compare other options first.

Are there any grants or special programs for remodels in Sacramento?

Some local and state programs exist for specific needs, like emergency repairs or ADUs. For example, Sacramento City/County offer permit-ready ADU plans, and state-level grants occasionally come and go (like the CalHFA ADU Grant).

Homeowners often also want clarity on how much a home addition costs in Sacramento, since expenses can vary widely depending on scope and design.

Can I deduct interest on a remodel loan?

Sometimes. IRS rules allow deductions if the loan funds are used to “buy, build, or substantially improve” the home that secures the loan. Always confirm with your tax professional.

What’s the smartest first step before choosing financing?

Get your project scope clear. Knowing what you want (and what it might cost) helps you match the right financing tool to the job instead of forcing the project to fit the loan.

Ready to Remodel in Sacramento?

H&H Builds specializes in kitchens, additions, ADUs, whole-home remodels, and targeted upgrades that make Sacramento homes work better for the families who live in them. We proudly serve East Sacramento, Arden-Arcade, Carmichael, Fair Oaks, Folsom, Granite Bay, and and many of the best neighborhoods in the greater Sacramento area.

Contact H&H Builds today for a consultation that sets your home remodel on the right path.