How this calculator works
A home improvement loan finances a renovation, usually as an unsecured personal loan or a secured home equity product. This calculator starts from the quoted cost, adds a contingency allowance for the changes and surprises that renovations often bring, deducts the cash you will pay, and amortises the rest at monthly compounding. It does not model draws paid to a contractor as work progresses, permit fees, or the effect on your property tax assessment. A secured loan may offer a lower rate but puts your home at risk if payments stop; an unsecured loan costs more but ties only to your credit.
Formula
Contingency = quoted cost × contingency percentage. Total project = quoted cost + contingency. Amount borrowed = total project - cash paid. i = annual rate / 12; n = term in months. Payment A = P × i / (1 - (1 + i)^(-n)). Total interest = n × A - P. Financed share = amount borrowed / total project.
Worked example
A $25,000 renovation with a 10% contingency becomes a $27,500 project. Paying $5,000 in cash leaves $22,500 to borrow. At 9.5% over 84 months the payment is $367.74, so interest is $8,390.13 and the whole project costs $35,890.13 once interest is included. The loan covers 81.82% of the project.
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Frequently asked questions
Should the contingency be financed?
Budget it whether or not you borrow it. If the renovation comes in under budget, you can repay the unused part early; if it overruns, you are not forced to apply for more credit mid-project.
Is a secured or unsecured loan better?
A secured loan, such as a home equity line of credit, usually has a lower rate but uses your home as collateral. An unsecured loan avoids that risk but costs more and is limited by your credit.
Are contractor fees included?
The quoted project cost is the figure to use, and it should already include the contractor's price, materials and any permits the contractor arranges. Add anything you will pay separately to the project cost.
Will renovating increase my property tax?
It can, when an assessment reflects the improvements. That cost is not in this calculation, which covers the loan only.