We’re looking to do a $160k home renovation – is an 8% interest rate for a HELOC too high to justify it?

When inflation went on a rampage following the pandemic, the Federal Reserve had to do something to intervene. So the central bank went and raised its benchmark interest rate multiple times, driving borrowing costs upward for consumers across the board.

Even though the Fed made a few rate cuts in late 2024, borrowing is still an expensive prospect these days — so much so that you may be wondering if it’s worth doing. Such is the case for this Reddit poster.

Here, we have a homeowner who’s looking at doing a $160,000 renovation. They’re thinking of tapping their home equity and taking out a HELOC, or home equity line of credit, to pay for it.

But they think they’re looking at an 8% interest rate. And based on that and their projected repayment period, they’re potentially going to spend $12,000 to $15,000 in interest to finance their project.

Their main question is, should they go through with it? And my answer is, yes – provided they can afford it and that there’s a good reason to do the renovation.

It’s okay to prioritize your qualify of life

The poster here does not share the details of their renovation project. But I have to assume it’s an extensive one that will enhance their quality of life while they’re living in their home.

So if they intend to stay in their home for another 12 to 15 years or more, then they can think about it this way: The $12,000 to $15,000 in interest they’re paying could be $1,000 a year, or less than $100 a month, to enjoy their living space more.

Also, the project could increase their home’s resale value. So they may end up recouping a good portion of their costs once they sell.

One reason for the poster not to do the renovation is to keep up with the Joneses. But if they genuinely want to do these improvements, there could be a lot of benefit in moving forward.  

Of course, an 8% HELOC rate may not be something to celebrate. But it’s important to remember that borrowing is just plain expensive now, so a rate like that isn’t unreasonable in today’s environment. However, I’d encourage the poster to shop around in case there’s a better deal out there.

Make sure the HELOC is affordable

Most importantly, I think the poster needs to run the numbers to see what their HELOC payments will amount to and make sure they’re affordable. The fact that they think they’ll only pay $12,000 to $15,000 in interest, though, means they expect to repay their debt pretty quickly. So that leads me to believe they can swing their payments.

HELOCs often give you multiple years to repay what you owe. It seems like the poster is working with an accelerated timeline.

One final thing I’d suggest is that the poster talk to their financial advisor, if they have one, about the project and get their input. Their advisor can tell them if moving forward will derail another big financial goal. An advisor might also have suggestions about alternative ways to finance the project affordably.

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