HomeHome ImprovementHome Improvement Loans No Equity
Advertising Disclosure Acorn Finance receives compensation from some of the companies featured on our website, which may influence the presentation and order of the offers shown. Please note that not all loan options, savings products, or lenders are represented on our site.

Home Improvement Loans With No Equity

Compare monthly payment options from several lenders in under 2 minutes.

How much would you like to finance?

How To Get A Home Improvement Loan With No Equity

There are several ways that you can finance an addition to your home or other home improvement project even if you do not have the necessary equity in your home. A home equity loan or line of credit will typically require you to have at least 15-20% equity in your property at the time that you apply for the loan. During the underwriting process, your home will likely be subject to an updated appraisal in order to determine your home’s current value.

Get Started

Compare rates from top lenders

Learn More About Home Improvement Loans With No Equity

Equity-based forms of financing carry a high level of risk for the borrower, so even if you do have equity, you may not want to tap into it for your home improvement loan.

Read more - FAQ


Can I Get a Home Improvement Loan With No Equity?

If you do not have enough equity in your home, or simply prefer not to use equity-based forms of financing, you can still get a home improvement loan. There are a few different types of financing you can consider without using your home's equity. The most popular option for accessing cash with no equity is to take out a personal loan. A home improvement personal loan is a great way to access up to $100,000 in cash with little to no paperwork or red tape. You will not need to undergo an appraisal or demonstrate how much equity you have in your home.
You will also not need to subject your home renovation project to any kind of oversight or eligibility requirements with a personal loan. In fact, you can even do the work yourself. This is in sharp contrast to other types of financing such as an FHA 203(k) loan which requires homeowners to get all potential renovation projects approved. With an FHA 203(k) loan, all of your improvements must be completed by a licensed contractor and deemed eligible before the work can begin. The work must also be completed with 6 months of loan origination.
Both of these options allow consumers to obtain financing for home projects with no equity.

How Do You Finance an Addition Without Equity?

So what options does this leave you? Homeowners who do not use an equity-based form of financing can still take out a personal loan. Personal loans are a great way to finance your home improvement projects and other needs without the red tape involved in taking out a home equity loan or line of credit. You can access funds in amounts up to $100,000 in as little as 1-2 business days with a home improvement personal loan. Best of all, the work that you wish to complete on your home is not subject to any additional approvals or restrictions when you use a personal loan for your financing. You can even do the work yourself!

Alternatively, you can consider refinancing your mortgage into an FHA 203(k) rehab loan which allows you to add renovation costs into the amount of your mortgage, resulting in one monthly payment. FHA 203(k) loans do not require you to use or tap into your home's equity in order to secure the financing. Instead, they are backed by the government and allow borrowers access to some of the lowest interest rates available. On the other hand, FHA 203(k) loans do come with the potential to have to pay closing costs and private mortgage insurance.

Can I Borrow Money Against My House for Home Improvements?

There are a number of ways that consumers can borrow money by using the equity in their home to obtain financing. The most common options available to homeowners with at least 15-20% equity in their home include home equity loans and home equity lines of credit (HELOC).
Home equity loans and lines of credit both use the current equity in your home as collateral in order to secure your financing. A HELOC allows you to have ongoing access to revolving credit that can be used for a variety of needs. You can take out money as many times as you need. Home equity loans give you the cash you need in a single lump sum that is then paid back in equal monthly payments over time as an installment loan. Both of these options are very popular with homeowners for their flexibility, long repayment periods, and low interest rates.
Additionally, you can take out up to 80% of your home's current equity in cash by utilizing a cash-out refinance. A cash-out refinance uses the equity in a property to provide the owner with cash that can be used towards home improvement projects or any other major expense.
Unlike other equity-based options that are taken out on top of your current mortgage, these loans work by refinancing your home with a new mortgage that allows you to pull out some of your home's equity in cash. Therefore, a cash-out refinance is a great way to get the cash you need without taking out a separate form of financing with its own monthly payment and interest. Keep in mind that with a cash-out refinance you will need to pay closing costs, undergo an appraisal to determine your home's current value, and pay private mortgage insurance (PMI) if you withdraw more than 80% of your home's equity in cash.
Most equity-based financing options carry the risk of foreclosure if you fail to repay your loan balance. For this reason, some consumers choose to avoid using financing that uses the equity in your home to secure the loan.

What is a No Equity Loan?

The name "no equity loan" can be a bit confusing. To understand where the name comes from, it is important to note that most equity-based forms of financing do not allow the borrower to take out more than 80% of their home's equity. On the other hand, a no equity loan is any loan that allows the borrower to take out 100% or more of their home's current equity, which would leave you with no equity after that second loan is funded. Most lenders still require you to have some equity in your home before taking out a no equity loan.
For example, if you want to borrow $25,000 on a home that is worth $100,000 and a mortgage balance of $80,000, you will need to find a lender who is willing to give you a no equity loan.
These loans can be risky for homeowners because you can quickly become upside down in your loan. They are not recommended in many cases unless you know that you will be staying in the home for a long period of time and can pay off the loan balance relatively quickly with no issue.
It is also not recommended to take out a no equity loan in a declining real estate market.
These loans may also be known as 125 percent loan-to-value (LTV) home equity loans.

Do I Need to Tell Mortgage Companies About Renovations?

When you are undergoing a home renovation, there is usually quite a bit of paperwork and red tape that comes along with the process. Homeowners are expected to comply with all local building codes and ordinances as well as request permits and undergo inspections whenever necessary. Without taking these steps, you may have trouble selling your home or even have to redo the work later on if your buyer's lender asks to see proof of permits and inspections.
In some cases, your lender may have even put something known as a "review clause" in your mortgage when you bought the home. This is to protect them in the event that they take possession of your home through foreclosure. Remember, your home is their collateral and renovations affect property value. A bad job can even lower your home's value. Minor repairs and upgrades shouldn't require approval, but major work done to your home just might.
So when in doubt, check with your mortgage company (and your homeowner's insurance provider) to see if they require notification or approval before your home renovations begin.
Lenders and insurance companies simply want to see that you are complying with all local building codes and undergoing the proper inspections when dealing with the property.

Can You Add Renovation Costs to Conventional Mortgage?

The short answer is no, they cannot, but homeowners can pursue other options like a cash-out refinance or a home equity loan in order to pay for their home's renovation costs. Some private lenders may offer their own renovation or rehab mortgage loan, so check with your lender.
It is possible to add renovation costs into your mortgage when the lender or mortgage program allows it. For example, the FHA 203(k) rehab loan allows borrowers to roll up the costs of their home improvement projects into the mortgage loan resulting in one single monthly payment.
There are a number of advantages of using this type of financing, which makes them a popular choice for many homeowners.

How Do You Build Home Equity With Home Improvements?

Any home improvements that you complete on your property should increase your property value, thereby increasing the amount of equity that you hold in your home.
Home equity is the value of a homeowner's stake in their home. It's calculated by taking a property's current market value and subtracting any liens (like a mortgage) that are attached to the property. Therefore, anything that increases your home's value increases your equity.
Some of the most popular ways to increase your home's property value include kitchen and bath renovations, home additions, exterior upgrades and flooring upgrades.

Can You Use a 203k Loan for an Addition?

The short answer is that, yes, you can use an FHA 203(k) loan for your home addition as long as it is not a streamline loan. Streamline 203(k) loans are for non-structural work only, while the full 203(k) loan can be used for home additions and other major structural renovations.
Home additions are one of the most popular reasons that homeowners take out home improvement financing. With an average cost of $46,000 to add a home addition, few people have the means to pay for such an expense upfront. Thankfully, homeowners have access to a variety of ways to finance a home addition including a personal loan, home equity loan, and an FHA 203(k) loan. With an FHA 203(k) loan, all home repairs and upgrades must be deemed eligible and approved before the work can begin. Therefore, it is important to know if you can use an FHA 203(k) loan for a home addition.

What is the Difference Between Home Equity Loan and Non Home Equity Loan?

A home equity loan uses the current value of your home and your loan balance to determine the amount of equity you have in your home. The bank then holds your property as collateral in order to give you up to 80% of your home's equity in case. You are essentially taking out a second mortgage on your property which carries its own unique set of risks. In the event that you default on the repayment of your home equity loan, the lender has every right to attempt to initiate the foreclosure process on your home in order to recoup their losses.
Types of financing that do not use your home's equity are known as unsecured loans or non home equity loans, are typically a much safer option for funding your improvement projects. These loans can include personal loans and government-backed rehab loans such as the FHA 203(k) loan.

Can I Take Out a Second Mortgage Without Equity for Home Improvements?

You may be able to take out a no equity loan, also known as a 125 percent loan-to-value (LTV) home equity loan, if you do not have enough equity in your home to qualify for traditional equity-based forms of financing like a home equity loan or line of credit.
However, this type of financing is generally not recommended due to the inherent risk involved in owing more than your home is worth. You may want to consider taking out a personal loan instead to fund your home improvement projects without any of the disadvantages and risks.

Good Uses of a Home Improvement Loan with no Equity

When you will be making significant upgrades or improvements to your property that may increase your home's property value and equity, a home improvement loan with no equity can be a worthwhile pursuit. This is also the case if you are making necessary repairs to your home that aren't covered by your homeowner's insurance but are needed to keep your home livable.

Poor Uses of a Home Improvement Loan with no Equity

Poor uses of a home improvement loan with no equity would be to add cosmetic upgrades to your home that do not increase your home's value. Additionally, you would not want to take out a home improvement loan with no equity in a declining real estate market. This could easily leave you entirely upside down in your loan and unable to move without paying the difference.

Ways to Boost Your Home Equity

There are a few ways to increase your home's equity. The easiest is to make additional or larger mortgage payments in order to chip away at your loan balance and decrease the amount you owe. Every time you pay an extra amount on top of your regular monthly payment, the money you pay goes directly to the principal and increases your home's equity.
Alternatively, you can consider refinancing your mortgage to a new loan with more beneficial loan terms. For example, a new mortgage with shorter loan term and lower interest rate allows you to pay more money against the principal much faster.
One of the best ways to increase your home's equity is to make certain improvements to the property. Although this obviously takes time and money, you can see a big increase in your home's property value and therefore its equity. Some of the most beneficial home renovation projects for increasing property value include kitchen and bath remodels, room additions, basement finishing projects, flooring upgrades, repainting, and exterior upgrades. Completing any of these projects will give you the most return on your investment and boost your equity.
Finally, in a hot real estate market where property values are steadily increasing, all you may need to do in order to see an increase in your home's equity is just wait.

$ Loan Calculator


Find the loan you're looking for

Table comparing monthly payments, APRs for approved personal loans.
See your options
Take a few minute to answer few questions, and we'll match you with the right range of lenders to consider
Choose your loan
Find your favorite marketplace of offers and apply directly with the lender you prefer
Do your project
If you're approved, use your funds to cover all your costs now, and pay the lender back month by month

What can I do with a $2,000 personal loan?

A $2,000 personal loan has a number of uses, including (but not limited to):
Home improvement Buying a car Wedding costs
Debt consolidation Medical bills Startup business costs

Still have questions?

One home, endless possibilities


Personal Loan Information