Renovation and remodeling: The differences explained

When it comes to updating your outdated kitchen or revamping your home for your growing family, you want to either renovate or remodel your home.

Renovation and remodeling are two terms often used interchangeably, but they pertain to different aspects of home improvement.

Whether you’re looking to freshen up your space or transform it, understanding the distinction between renovation and remodeling is essential when talking to a contractor or a mortgage lender.

What’s the difference between a renovation and a remodel?

In short, remodels tend to be more transformative projects than renovations. Let’s take a closer look at the distinct differences between renovating and remodeling your home.

What is a home renovation?

 Home renovations involve making updates to your home's design or finishes without significantly altering its structure or layout. Home renovations tend to be smaller projects that you can DIY, but you can also hire contractors to do the work. Examples of home renovations include the following:

• Repainting a room
• Installing new cabinets or cabinet hardware
• Upgrading appliances
• Installing new light fixtures
• Replacing kitchen tiles
• Installing exterior shutters

These changes can provide a more functional living space that better suits your lifestyle. When contemplating a home renovation, there are several important factors to consider. First and foremost, you need to establish a clear vision of what you want to achieve with the renovation. Consider your goals, priorities, and how the renovation will enhance your living space.

What is a remodel?

A home remodel is a larger project that changes the structure or layout of your home. These projects tend to be more extensive and will likely require you to obtain permits or hire professionals. A few examples of a remodel include:

• Completing a full kitchen remodel
• Tearing down a wall to make an open floor plan
• Redesigning the layout of your bathroom
• Expanding your home’s square footage
• Adding a bedroom, bathroom, or egress window to your basement

Because they are larger projects, remodels tend to be more costly than renovations. However, the added cost can be worthwhile as remodels can add significant value to your home.

Should you renovate or remodel?

Home renovations and remodels can both make sense for homeowners who want to update the look and feel of their living space. Here’s where each option makes the most sense.

When a renovation makes sense:

• You’re content with your home’s current layout but want to make small updates
• You’re getting ready to sell your home and want to make upgrades to increase your home’s value
• You want to make upgrades to your home, but time and budget limits make remodeling impossible

When a remodel makes sense:

• You want to add space or functionality to your home
• You’re planning to live in the house long-term
• Your current layout is outdated and you want to update its design or flow

How to finance your remodel or renovation

Once you decide whether you want to renovate or remodel your house, you need to figure out how to pay for it. The good news is that there are plenty of ways to finance your big home improvement project.

• Home equity loan: Borrow from your equity to fund home improvement projects at a lower interest rate than other consumer loans.
• Home equity line of credit (HELOC): Uses your home’s equity to establish a line of credit, which can then be used for home projects.
• Cash-out refinance:This option can be a smart choice if you can secure a lower interest rate than your existing mortgage or want to consolidate higher-interest debt while funding your remodel. Keep in mind that you’ll be resetting your loan terms and paying closing costs, so it’s important to weigh the long-term costs and benefits.
• Personal loan: If none of the options above fit your needs, a simple personal loan can be used to pay for home remodel or renovation costs.

Interest on home equity loans, HELOCs, or cash-out refinancing may be tax-deductible if the funds are used to buy, build, or substantially improve the home securing the loan and you itemize deductions. Consult a tax professional for guidance.

The bottom line: Get ready to remodel or renovate your home

As you can see, there can be a vast difference between renovating and remodeling a home. Renovating your home involves making cosmetic changes to enhance the appearance of your home without altering its structure; remodeling fundamentally transforms the structure and layout of a home. Both renovation and remodeling can significantly increase a home's value and improve its functionality.

If you're considering a home project but lack the necessary funds, applying for a home equity loan can be a viable solution, allowing you to tap into the equity you've built in your home to finance your renovation or remodeling project. Whether you're looking to refresh your home's appearance or completely transform its layout, a Rocket Mortgage loan can help you turn your vision into a reality.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

Refinancing may increase finance charges over the life of the loan.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.

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