The five paths
HELOC
Most flexible. Draw as the project unfolds. Pay interest only on what's drawn. Variable rate.
Home Equity Loan
Fixed rate, lump sum. Best for projects with a hard contract price.
Cash-Out Refinance
Replace your first mortgage with a bigger one. Only makes sense if current rates ≤ your existing rate.
FHA 203(k) / HomeStyle
Borrow against the home's after-renovation value. Useful when you don't yet have the equity to draw from.
RenoFi / Renovation HELOC
Specialty product. Lends against post-reno value (up to 90% CLTV). Good for major projects without enough equity today.
Contractor / 0% Financing
Often the worst-priced option after the promo period. Read the fine print.
San Diego-specific situations
ADUs and casitas
San Diego has aggressively encouraged ADU construction. Typical ADU project costs $180K–$320K. Best financed via:
- HELOC if you have enough equity (most owners with 3+ years of appreciation do)
- RenoFi or HomeStyle if you don't — they'll lend against the post-construction value, which often increases the home value by more than the construction cost
- Construction-to-perm loans are an option but more friction; only worth it for projects above ~$400K
Solar and electrification
Cash, HELOC, or PPA. Avoid PACE financing — it places a senior tax lien on your home that complicates resale and refinance. PACE has bitten countless San Diego sellers at closing.
Fire-hardening (after the wildfires)
Some California programs offer rebates for ember-resistant venting, fire-rated roofing, and defensible-space work. Ask your insurer for premium credits if you complete the work.
FHA 203(k) — the renovation FHA loan
Lets you roll renovation costs into a single FHA mortgage at purchase or refinance. Two flavors:
- Limited 203(k): Up to ~$35K of repairs. Cosmetic only. No structural.
- Standard 203(k): No project cap (subject to FHA loan limits). Can include structural, additions, system replacements.
Trade-off: you carry FHA MIP for life of loan, and the process is heavily inspected (HUD consultant, draw schedule, lien waivers). Worth it for distressed homes you're rehabbing; rarely the right tool for a refresh.
Fannie Mae HomeStyle
The conventional answer to 203(k). 5%-down for primary residences, 15% on second homes. PMI applies under 20% equity but is removable. Cleaner than 203(k) for most San Diego scenarios.
Before financing any renovation, get firm contractor bids — not "ranges." A common scenario: the homeowner finances $80K, the project hits $145K, and they're scrambling to figure out where the gap comes from. Pad your budget by 15% and finance against the padded number.