Using a HELOC for Home Improvements: What's Worth It and What's Not

A home equity line of credit is one of the most cost-effective ways to fund a major renovation. At a current average rate of 7.23% -- well below the 12%+ you'd pay on a personal loan and far below the 22% typical of credit cards -- a HELOC makes large projects financially accessible in a way that unsecured borrowing simply doesn't.

But not all home improvements are created equal. Some add substantial market value. Others improve quality of life while returning a fraction of what you spent. Knowing the difference is what separates a smart HELOC use from an expensive one.

What a HELOC Actually Costs to Carry

At the current national average of 7.23% (as of February 27, 2026, per Curinos), the interest-only payment during the draw period is straightforward: annual rate divided by 12, applied to your outstanding balance.

Now compare that to the alternatives on the same $50,000:

The HELOC isn't just cheaper -- it's dramatically cheaper. A homeowner who funds a $50,000 landscaping project on a credit card pays $11,000 per year just to carry the balance. The same project on a HELOC costs $3,615 annually. That $7,385 annual difference alone often justifies the paperwork.

The key qualifier: your home is the collateral. A missed credit card payment hurts your score. A missed HELOC payment puts your home at risk. Borrow only what you have a clear plan to repay.

Projects With Strong ROI

Minor Kitchen Remodel (mid-range): ~70-75% ROI A focused update -- new cabinet fronts, countertops, appliances, and hardware -- in the $30,000-$60,000 range consistently returns 70-75% of cost at resale nationally. An $80,000 kitchen remodel might add $55,000-$60,000 in home value. You don't fully recover the cost, but you live in a better kitchen for years and capture a meaningful return at sale.

HELOC cost to carry $80,000 at 7.23%: $482/month, or $5,784/year.

Garage Door Replacement: ~90-95% ROI One of the highest-returning projects in most years' Remodeling Magazine Cost vs. Value reports. A modern steel replacement door typically costs $4,000-$6,000 and returns nearly all of it. Not a standalone HELOC project, but smart to bundle with other improvements.

Deck or Outdoor Addition: ~65-70% ROI A wood deck addition in the $20,000-$50,000 range typically returns 65-70% at sale, with higher returns in markets where outdoor living matters year-round. Composite decks cost more but last longer and often command resale premiums.

Primary Suite or Bath Renovation: ~55-65% ROI A full primary bathroom renovation or suite expansion can run $100,000-$200,000 for high-end finishes. ROI lands around 55-65% nationally, though it varies by market. In high-value zip codes where buyers expect premium finishes, the return can be higher.

ADU (Accessory Dwelling Unit): ~70%+ ROI, plus rental income Adding a detached or attached ADU is increasingly attractive in high-cost markets. In San Diego, Los Angeles, and Seattle, a $200,000 ADU can generate $2,000-$3,500/month in rental income -- easily covering the $1,205/month HELOC interest payment on a $200,000 draw, with cash left over to offset principal.

Projects to Approach Carefully

Major Kitchen Overhaul (high-end): ~50-55% ROI Ultra-premium kitchen renovations with custom cabinetry, imported stone, and professional appliances can cost $150,000-$300,000+ and typically return 50-55% at resale. Buyers in your neighborhood may not pay a premium large enough to recover an overbuilt kitchen. Know your market's price ceiling before spending past it.

Luxury Pools: ~40-50% ROI A custom inground pool runs $80,000-$150,000+ and typically returns 40-50% of cost. This varies heavily by climate and neighborhood. In markets where every comparable home has a pool, adding one is necessary. Where few do, you may add more lifestyle than value.

Sunroom Additions: ~50-55% ROI Sunrooms are expensive to build and only moderately valued at resale. The cost-value gap is larger than most homeowners expect.

The Tax Angle: When Interest Is Deductible

HELOC interest is deductible when funds are used to "buy, build, or substantially improve" the home securing the loan, per current IRS guidelines. Kitchen remodels, bathroom additions, structural repairs, ADUs -- these generally qualify. Using HELOC funds for vacation, a car, or debt consolidation forfeits the deduction.

For homeowners in the 32-37% federal tax bracket, a deductible 7.23% rate becomes an effective after-tax rate of roughly 4.5-4.9%. Confirm deductibility with a tax advisor based on your specific use of funds.

Three Questions Before You Draw

Before opening a HELOC for a home improvement, these three questions are worth answering clearly:

What does this project return at resale in your specific market? National ROI averages are a starting point. Your neighborhood's price ceiling matters more. Hauser's home analysis tools show where your home sits relative to area comps -- and which upgrades your market's buyers are actually paying for.

Can you carry the interest cost without strain? A $150,000 draw costs $904/month in interest alone. Model the draw-period cost against your income and existing debt before committing.

How long will you stay in the home? If you're selling in 18 months, closing costs and market timing may absorb the value gain. If you're staying 5-10 years, you capture the improvement through use and realize more value at a future sale.

Use Hauser's HELOC calculator to model your specific draw amount and carrying cost before you finalize any project budget.

Sources

• Yahoo Finance / Curinos, HELOC and Home Equity Loan Rates Today, February 27, 2026: https://finance.yahoo.com/personal-finance/mortgages/article/heloc-home-equity-loan-interest-rates-today-friday-february-27-2026-110054165.html

• Bankrate, Current HELOC Rates in February 2026, February 25, 2026: https://www.bankrate.com/home-equity/heloc-rates/

• CBS News, Today's HELOC and Home Equity Loan Interest Rates, February 2026: https://www.cbsnews.com/news/todays-heloc-and-home-equity-loan-interest-rates-february-18-2026/

• Remodeling Magazine, Cost vs. Value Report 2025: https://www.remodeling.hw.net/cost-vs-value/ (accessed February 2026)

• IRS Publication 936, Home Mortgage Interest Deduction: https://www.irs.gov/publications/p936

• All calculations verified: interest-only = P x (APR/12); amortizing = M = P x [r(1+r)^n] / [(1+r)^n - 1].