How Does a Home Equity Loan Work for Home Improvements?

First Seacoast Bank • July 20, 2023
A photo of two homeowners looking at a room they are renovating in their home.

There are a variety of options available to you when it comes to financing home improvements. One popular option is a home equity loan. If you’re new to this concept, it might seem intimidating, but we can help make some sense of it for you.

Let’s explore the ins and outs of home equity loans and how they work for home improvements.

What’s a Home Equity Loan?

In the simplest of terms, a home equity loan is a loan that uses the equity in your home as collateral. But let’s back up for a moment.

Equity is the difference between the current market value of your home and the amount you still owe on your mortgage. For example, let’s say the current market value of your home is $300,000, and you have a mortgage balance of $200,000. This would mean the equity you’ve built up in your home is $100,000. 

With a home equity loan, you can borrow against that equity to fund home improvements or other expenses.

Essentially, you’re leveraging your good record of making your mortgage payments to show your lender that you are trustworthy enough to loan additional money to make improvements on your home.

Types of Home Equity Loans

There are two types of home equity loans: traditional home equity loans and home equity lines of credit (HELOCs). 

Traditional home equity loans provide a lump sum of money upfront, while HELOCs function more like credit cards, allowing you to draw on the available credit over time. Both types of loans typically have payments that must be made each month until the loan is paid off. However, with a HELOC, you only pay interest on the amount used, not the full credit limit. 

Why Choose a Home Equity Loan for Your Home Improvements? 


First and foremost, home equity loans may offer lower interest rates than other types of loans. This makes them an attractive option for borrowers looking to finance their projects at a lower cost. Additionally, because your home's equity secures the loan, the lender may be willing to lend you more money than they would with an unsecured loan.

Another benefit of a home equity loan is that your interest may be tax deductible (up to a certain amount and dependent upon your tax situation). This can help reduce your overall tax bill and make the loan even more affordable. However, it's essential to consult with a tax professional to fully understand the tax implications of a home equity loan.


As with any other loan product, there are some potential drawbacks to consider when taking out a home equity loan, such as using your home as collateral. 

It’s always a good idea to make sure you have a backup plan in place to keep making the payments due to any unforeseen circumstances.

First Seacoast Bank Home Equity Loans

At First Seacoast Bank, we’re dedicated to reinvesting in our community, and that includes helping homeowners maintain and improve their homes, pay off debt, fund education expenses, or cover emergency expenses. Our home equity loans are an excellent way to borrow money at a reasonable rate.

  • $25,000 minimum/$300,000 maximum loan amount
  • Competitive rates
  • Quick access to funds
  • Money stays local
  • Interest may be tax-deductible* 

Ready to Learn More?

We have mortgage loan officers and lenders on staff to help you learn more about your home equity loan options whenever you’re ready. You have a couple of different options if you want to chat with First Seacoast Bank experts. You can:

As always, we look forward to serving you first.

*Consult a tax professional