FHA 203k vs Home Equity Loan: Which Has Lower Interest for Home Improvements?
💰 Quick Answer: FHA 203k Has Lower Interest
On a $50,000 renovation over 15 years: FHA 203k total cost = $64,350 | HELOC total cost = $79,950 | You save $15,600 with FHA 203k. Compare renovation loans now →
Which has lower interest: FHA 203k or home equity loan? FHA 203k loans have lower interest rates (6.5% average) compared to HELOCs (8.5% average) and home equity loans (8.25% average) in 2026. On a $50,000 renovation, FHA 203k saves you $15,600 in interest over 15 years. However, FHA 203k requires more paperwork and takes 45-60 days. This complete comparison shows costs for $20K, $50K, and $100K projects, plus when to choose each option.
💵 Total Cost Comparison: $20K, $50K, $100K Renovations
| Loan Type | Interest Rate | $20K (15yr) | $50K (15yr) | $100K (15yr) |
|---|---|---|---|---|
| FHA 203k | 6.5% | $25,740 $174/mo | $64,350 $435/mo | $128,700 $870/mo |
| Home Equity Loan | 8.25% | $31,560 $192/mo +$5,820 | $78,900 $480/mo +$14,550 | $157,800 $960/mo +$29,100 |
| HELOC | 8.5% | $31,980 $196/mo +$6,240 | $79,950 $490/mo +$15,600 | $159,900 $980/mo +$31,200 |
💡 The Savings Are Massive
- • $20K renovation: FHA 203k saves $5,820-$6,240
- • $50K renovation: FHA 203k saves $14,550-$15,600
- • $100K renovation: FHA 203k saves $29,100-$31,200
🎯 Bottom line: For major renovations ($50K+), FHA 203k's lower rate saves you THOUSANDS.
⚖️ Pros & Cons: Side-by-Side
FHA 203k Loan
✅ PROS:
- ✓ Lowest interest rate (6.5% vs 8.5%)
- ✓ Low credit score OK (580+)
- ✓ Buy + renovate fixer-uppers
- ✓ Only 3.5% down
- ✓ Saves $15K+ on $50K project
❌ CONS:
- ✗ Slow process (45-60 days)
- ✗ More paperwork
- ✗ Must use approved contractors
- ✗ Ongoing PMI (0.55-0.85%/year)
HELOC
✅ PROS:
- ✓ Fast approval (2-3 weeks)
- ✓ Instant access to funds
- ✓ No contractor restrictions
- ✓ Interest-only payments
- ✓ Tax deductible
❌ CONS:
- ✗ Higher interest rate (8.5%)
- ✗ Rate can increase (variable)
- ✗ Need 15-20% equity
- ✗ Costs $15K+ more on $50K project
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🎯 When to Choose FHA 203k vs HELOC
Choose FHA 203k If:
- ✓You're buying a fixer-upper
- ✓You need $50K+ for major renovations
- ✓You have lower credit score (580-620)
- ✓You want the lowest interest rate
Choose HELOC If:
- ✓You need money fast (2-3 weeks)
- ✓You have 15-20% equity
- ✓You want flexibility (draw as needed)
- ✓You're doing smaller projects ($10K-$30K)
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