Across the country, homeowners are putting off major decisions like selling or refinancing. Military families, who often face unique housing needs and timelines, are right in the thick of it.
With mortgage interest rates hovering near 7%, many homeowners choose to stay put rather than give up the ultra-low mortgage interest rates they secured during the pandemic. But staying put doesn’t have to mean living with a home that no longer fits your family’s needs. In today’s high-rate environment, tapping into home equity for renovations may be a more innovative and financially sound option than selling or refinancing your first mortgage.
Many Homeowners Have Lower Rate Mortgages Now
During the past few years, millions of American homeowners locked in mortgage rates below 4%, some even below 3%. Those low rates are now golden handcuffs for military families who purchased homes with VA Home Loans or refinanced at historic lows. “Selling a home in today’s market likely means giving up that favorable mortgage for a new loan with an interest rate nearly double what you’re paying now,” says Rob Greenbaum, Chief Marketing Officer with AAFMAA Mortgage Services LLC (AMS).
“Refinancing your existing mortgage just to pull cash out for renovations carries the same risk: you lose the low-rate first mortgage and replace it with a more expensive one. That’s why many military homeowners are now looking to home equity loans and second mortgages as the key to upgrading their space without sacrificing their existing low monthly payments,” he adds.
Related: Second Mortgage Loan Benefits & Guidelines
How Home Equity Loans Work
A home equity loan, often called a second mortgage, allows you to borrow against the equity you’ve built in your home. This is the portion of the home’s value that you truly own—essentially, the difference between your home’s current market value and the balance of your primary mortgage. If your home is worth $350,000 and your mortgage balance is $250,000, you have $100,000 in equity. A lender might let you borrow a portion of that, often up to 85%, depending on your credit score, income and other factors. Keep in mind that not all lenders offer home equity loans and products may vary by state and your credit and other qualification factors.
Unlike refinancing your primary mortgage, a home equity loan doesn’t touch your existing loan or affect its terms. Instead, it’s a new loan layered on top of your current one, with its own rate, term, and payment schedule. The interest rate on a home equity loan is generally fixed, which makes budgeting easier. “Although these rates are higher than what homeowners saw during the pandemic, they’re still often lower than personal loan or credit card rates, especially for borrowers with good credit and strong equity positions,” Greenbaum says.
For example, a military homeowner bought a house in 2021 using a VA Home Loan with a 2.75% fixed rate and now wants to remodel the kitchen or expand a bedroom for their growing family. Selling the home and buying something new would mean walking into a mortgage at today’s 6.75% or higher rate, not to mention paying moving costs, closing fees and possibly relocating away from a convenient duty station or school zone. Refinancing that 2.75% VA Home Loan to borrow equity could also bump your monthly payments dramatically. But a $50,000 home equity loan, taken out at 8% over 10 or 15 years, might result in a manageable secondary payment, while your primary mortgage stays intact.
Related: Home Improvements That May Increase the Value of Your Home
Benefits of Home Equity Loans
This approach has become increasingly attractive as remodeling costs continue to rise. According to Verisk’s Remodel Index, the price of home repairs and improvements rose nearly 4% year-over-year in the first quarter of 2025. Most of this increase has been driven by labor shortages and rising wages, not raw material costs. “With skilled contractors commanding higher prices, homeowners need to finance bigger remodeling budgets. The ability to borrow against home equity has become vital in making that possible,” says Greenbaum.
Despite higher borrowing costs, spending on home improvement remains strong. Sales at building material and garden stores jumped nearly 1% in April, the most significant monthly increase in over two years. Annual home renovation spending reached $513 billion in the first quarter of 2025, and it’s projected to rise to $526 billion by early next year, according to Harvard’s Joint Center for Housing Studies. That momentum is fueled partly by necessity: nearly half of owner-occupied homes in the U.S. were built before 1980, with a median age of 41. Many of those homes now need new kitchens, modern plumbing, energy-efficient windows, or simply more space to accommodate today’s families.
“Military homeowners, especially those stationed in aging housing markets or near legacy installations, are more likely to own older homes that require repairs or updates,” says Greenbaum. “In many cases, choosing to renovate rather than relocate isn’t just a matter of taste—it’s about creating a functional, safe, and comfortable environment for a military family who may not want to uproot again soon.”
For those planning to remain in their homes for several more years—or at least until the next PCS orders—investing in improvements can enhance quality of life and resale value. Projects like bathroom remodels, new HVAC systems, or expanded living space can help a home stand out in a future market while making it more livable now. And if you’re using a home equity loan to fund those upgrades, the interest may even be tax-deductible if the loan is used for substantial home improvements, although you should always consult a tax advisor for personalized guidance on tax deductions.
What about HELOCs?
Homeowners also have the option of using a home equity line of credit, or HELOC, which offers more flexibility. A HELOC works like a credit card, allowing you to borrow, repay, and re-borrow funds up to a set limit during a draw period, typically 5 to 10 years. Unlike a home equity loan, a HELOC usually has a variable interest rate, which can rise or fall with market conditions. “This option may appeal to military homeowners who want access to funds over time for phased remodeling projects, rather than taking out one lump sum upfront,” Greenbaum says.
Of course, like all financial decisions, tapping into home equity carries risks. It’s essential to have a clear renovation budget, a reliable contractor, and a solid repayment plan. “Missing payments on a home equity loan could put your home at risk, just like with your primary mortgage,” notes Greenbaum. “But when used wisely, these products offer a pathway to improve your living situation without compromising the favorable mortgage terms you already hold.”
As home sales continue to slump and buyers remain cautious in the face of economic uncertainty, renovating your current home with a home equity loan or second mortgage may be the most practical and cost-effective option. For military families, deciding to stay and upgrade rather than sell and relocate may bring financial benefits and greater stability—something every military household values.
We’re Here to Help
Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.
Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!