How to Fund Sustainable Home Upgrades with Your HELOC

Key takeaways:

• Sustainable home upgrades can trim your utility bills, but some improvements can cost up to tens of thousands of dollars upfront. 

• Using a home equity line of credit, or HELOC, may help you fund sustainable home projects at a lower interest rate than using other lending products, like credit cards or personal loans. 

• Make sure you weigh the financial pros and cons of each project to make an informed decision, and have a plan in place to manage your debt. 

Considering a sustainable home upgrade? You’re far from alone. About seven in 10 American households are either undertaking or seriously considering sustainable home improvements, according to research conducted by AUX AIR USA. And 58% cite sustainability as an important factor in making their decisions. 

“The right sustainable upgrade can be advantageous for homeowners, and I’m seeing more and more customers come in looking to fund eco-friendly upgrades to help reduce their bills,” shares Shannon Zimmerman, a mortgage banker at Northwest Bank, who serves all of Northwest. “However, I’m also seeing that many of those clients face the same challenges — namely, that sustainable upgrades often come with a high upfront cost.”

While certain sustainable improvements, like low-flow toilets or shower heads, may be relatively affordable for households, larger ones can be prohibitively expensive to purchase with cash. For example, the average cost to install a 7.6kW solar panel system, for example, was over $30,000 in 2024 — a significant upfront investment for many households.

How home equity can power your vision

If you're feeling a little overwhelmed by the cost of sustainability upgrades, we’ve got good news: Your home equity may be able to fund your project.

A home equity line of credit, or HELOC, allows you to borrow against the equity in your home to open a line of credit. During the draw period on the HELOC — a predetermined period of time that usually lasts 10 to 15 years — you can borrow, repay and reborrow from the line of credit to make purchases or invest in your home. 

After the draw period, the line of credit converts to a loan, which you’ll repay with regular payments.

Why choose a HELOC?

One main advantage of a HELOC is its flexibility. “You can open a HELOC even if you don’t have a specific home improvement in mind,” says Zimmerman. “In fact, we typically recommend opening a HELOC well before you need it, so you don’t experience delays in accessing credit later, when you may be in a time crunch.”

Since a HELOC is secured by your home, it typically has a lower interest rate than unsecured forms of credit, like credit cards or personal loans. “It can quickly become impractical to fund home upgrades with a personal loan, for example, since the high interest rate could make it very expensive to borrow over time,” she says.

Finally, you’ll only pay interest on what you borrow — not on the total balance of your HELOC. If you use $500, for example, you’ll pay interest on $500, even if you have access to thousands of dollars with your line of credit. 

• Learn more: How to make the most of your home equity — outside the home

3 tips to fund sustainable home improvements with your HELOC

1. Consider short- and long-term ROI to make the right choice

It’s no secret that sustainable home projects trade off short-term costs for long-term savings. But it’s important to crunch the numbers to learn how long your investment will pay off and whether that timeline makes the project worth it to you. 

“We advise homeowners to consider several factors: Will you reach a new milestone in the next several years, like expanding your family or nearing retirement? Do you plan to sell your home?” Zimmerman advises. “Some projects, like solar panels, can take a decade or so to pay for themselves. So you want to make sure you’ll still be in the home to reap the benefits.”

Which costs and benefits should you consider?

Each situation is unique, but consider reviewing the following factors to find out if a sustainable upgrade makes financial sense. 

2. Look for opportunities to save money on interest

One key benefit of using your HELOC for home improvements is the potential to access lower rates than you would with a personal loan. But that doesn’t mean you shouldn’t explore every opportunity to save money on interest.

“Some vendors offer promotional financing rates, so you can finance your upgrade at a lower interest rate for the first several months, or even finance interest-free,” says Zimmerman. In these cases, it might make sense to finance with the supplier to take advantage of the promotional rate, then use your HELOC to pay off the balance in full once the promotional period is up.

Just make sure you read the fine print before taking this approach, she advises. “Some financing agreements charge a penalty if you pay off the loan early. It really goes back to crunching the numbers: Make sure you understand any hidden costs to this approach so you can choose the best option for you.”

3. Make a repayment plan that works for you

While a HELOC offers flexible access to credit, you still eventually need to pay it back. And planning ahead helps you avoid unpleasant surprises when the HELOC’s draw period expires and the balance converts to a loan. 

“We’re here to help you look ahead to figure out what your repayment period might look like,” Zimmerman says. “Even when you need to repay the loan, you still have some level of flexibility. We can help you find a solution that fits your budget and your lifestyle.”

If you want to get a jump-start on repayment, or you’re worried about managing your debt, you can also convert a portion of your HELOC to a loan early. That way, you can set up manageable payments to pay down your sustainable home upgrade, but retain access to the rest of your line of credit in case of an emergency. 

• Learn more: Home Equity Loan vs. Line of Credit

“It’s all about what will benefit your peace of mind. There’s so much flexibility when it comes to HELOCs and home equity loans, so we can put together a custom solution that works for you,” Zimmerman explains. 

We’re here to help you design your dream home

If you’re curious about renovations or home upgrades, have a specific project in mind or just want to make your home equity work harder for you, we’re here to help. Our dedicated team of lending experts can help you understand your options and weigh the pros and cons to find the right approach — or simply be a trusted sounding board as you map out your next move.