Zero-Interest Home Improvement Loans: How to Get One and Alternatives to Consider
Many low—and moderate-income, senior, veteran, or rural residential homeowners with equity who need essential home improvements can get a zero-interest home improvement loan.
Organizations, such as local and state department programs and nonprofit organizations, may grant these loans to help homeowners in need rather than to simply make money. We’ll explain how they work and how to qualify for zero-interest home improvement loans below.
Table of Contents
Can I get a zero-interest home improvement loan?
You can get a zero-interest home improvement loan if you meet all criteria specified by the granting organization. These criteria may include:
- Low income, such as at or above 80% of the median income.
- Living within the lender’s city limits
- Requiring health and safety violation remediation or major interior/exterior repairs
- The home is your primary residence
- Your name is on the title/deed
- At least 20% equity, and
- No recent adverse credit history
They’re not as widespread as other loans, and approval can be competitive since many loans are available on a first come-first served basis.
Some agencies and organizations, such as Texas’ Homeowner Rehabilitation/Reconstruction Loan Program in Austin and California’s Home Maintenance and Improvement Program in Oakland, don’t clearly state application windows, deadlines, or whether funds are available each year.
We recommend contacting the organization for this information and checking frequently for updates.
Organizations typically advertise these programs as deferred loans or assistance programs. In comparison with home equity or personal loans, there can be key differences:
| Product | Use | Credit/repayment terms |
| Zero-interest home improvement loan | Structural, heating/cooling, and other major repairs, and rehabilitation | Varies; fixed monthly payments; forgivable lien |
| Home equity loan/HELOC | Large projects, expenses, debt consolidation | Good credit; variable monthly (HELOC) and fixed monthly (home equity loan) |
| Personal loan | Moderate expenses | Good credit; fixed monthly |
Eligibility criteria
Homeowners who live in rural or urban areas and whose home requires essential improvements are often good candidates for a zero-interest home improvement loan if they have home equity. This means owing less on the mortgage than the home’s current value.
Not only must the essential repairs or modifications meet the program criteria, but they may also need to be completed within a timeframe determined by the program guidelines.
These details are typically listed in the application or the program webpage, but here’s a list of some common projects programs may consider “essential”:
| Project type | Example projects |
| Resolving health and safety issues | Removing lead-based paint/asbestos; upgrades for the disabled and elderly; exterminating termites |
| Weatherization | Installing solar heating; energy-efficient appliance upgrades; sealing air ducts; replacing windows and doors |
| General updates | Repairing or replacing roofs; air conditioning upgrades and installations |
Additional qualifications might include:
- Current property tax payments
- Age requirement––some programs require 18 years or older, while others require seniors
- Below or at median income. Some organizations use county or state median income determined by HUD, the Department of Housing and Urban Development.
The loan term length a lending organization establishes may last for 10 to 15 years and have restrictions during this time, like:
- Renting your home
- Transferring ownership/selling
- Refinancing
- Applying for home equity loans
Borrowers who adhere to the restrictions can expect to make regular, equal, interest-free payments over the loan’s life; some programs don’t require repayment from borrowers at all.
These forgivable loans––usually found through municipal or county organizations––will open a second mortgage or place a lien on your property over the loan term.
A lien allows the lender to claim your home as collateral for an unpaid loan. For example, on a 15-year loan, the lender will forgive/remove the second mortgage or lien after this period. For instance, breaking the terms by selling before the 15-year term ends means you must repay the loan.
Here’s a quick look at typical rates, loan amounts, and terms for zero-interest home improvement loans, HELOCs and home equity loans, and personal loans:
| Product | Interest rates | Loan amount/terms |
| Zero-interest home improvement loan | 0% | $40,000 – $150,000 or more, varies; 10 – 15 years, varies |
| Home equity loan/HELOC | 8% – 11% | Based on home equity; 5 – 30 years |
| Personal loan | 7% – 25% | $1,000 – $50,000; 2 – 7 years |
For example, a 10-year $50,000 zero-interest home improvement loan would cost only the amount borrowed. But you’d pay tens of thousands more with a 10-year $50,000 home equity loan or HELOC with 8% interest added on.
How to find zero-interest loan programs
Finding zero-interest home improvement loans and assistance programs may require some digging, but considering the potential savings, it’s worth it.
Start by visiting websites from:
U.S. government
- Reference the U.S. General Services Administration, USDA Rural Development, U.S. Department of Energy, and HUD.
- Search repair loans and grants––veterans, Native Americans, and rural residents may find more programs.
- You may also find low-interest loans via these resources, such as fixed 1% rates.
Your city or county
- Search for “no-interest home repair” or “improvement assistance” and your location.
- Call your local government office if you can’t find information online.
Nonprofit and charity websites
- Organizations, such as Habitat for Humanity—which relies heavily on local volunteers to build and restore homes—may also offer zero-interest home improvement loans, as well as affordable mortgages for first-time homebuyers, generally someone who hasn’t owned a home in three years or more. The application process can take several months to a year.
Get estimates for repairs or upgrades before going in and asking lenders for funds. Once you have an idea of what you need to borrow, figure out what fixed monthly payment you can afford that will fit into your budget. This will allow you to have much more productive conversations with lenders.
Crystal Rau, CFP®
How to apply for a zero-interest home improvement loan
Some organizations require applicants to complete and sign a hardcopy application. Contact the lending organization if it’s unavailable online.
The application may take 20 to 30 minutes, depending on the information required. Before starting, save time by gathering as much information about project costs, your pay stubs, tax returns, and mortgage statements.
Additionally, you may need to provide:
- Verification your income doesn’t exceed program limits
- Details on estimated project costs
- Your loan information
If you don’t qualify, search for programs in your area that offer grants––which don’t require repayment––or low-interest loans. Low-interest loans might not come with potential forgivable benefits, but they’ll cost less than most traditional borrowing options.
Alternatives to no-interest loans
Here are two other options if you don’t qualify for zero-interest home improvement loans.
Home equity line of credit (HELOC)
A HELOC is a form of revolving credit that relies on your home equity. Typically, you need at least 20% equity and good credit for approval.
HELOCs allow you to access funds for a certain number of years. These loans come with variable rates, with the exception of two of our top-rated HELOC lenders.
Once you’re approved for the loan and use funds, you’ll make monthly repayments, and then the funds become available again.
As of November 2024, rates are hovering around 7.75%. However, with most HELOCs, your rate will change. These aren’t ideal if you:
- Don’t intend on selling the home after completing repairs
- Cannot pay off the loan within a couple of years
- Have a tight budget
We explain how these loans work in our article on HELOCs, if you’d like to learn more before applying.
Home equity loan
Home equity loans are low, fixed-rate loans you receive as cash to spend however you’d like. They’re also generally available to homeowners with at least 20% equity and good credit.
Some of the best home equity loans we’ve researched offer borrowers repayment schedules ranging from five to 30 years.
Despite serving as second mortgages, both home equity loans and HELOCs can be good options if you’re looking for lower interest rates than personal loans or credit cards.
Lenders typically look for potential borrowers with good credit scores––670 or higher––but you could snag more favorable rates with:
- Significant home equity
- A low debt-to-income ratio, and
- A credit score above 740
| Consider a HELOC if you… | Consider a home equity loan if you… |
| Need cash in increments | Prefer fixed payments |
| Are unsure about project costs | Are making a large one-time purchase |
| Can repay the loan within 5 years | Need more than 5 years to repay the loan |
| Plan selling within 2 – 3 years | Want interest savings over the long term |
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