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

1. Can I get a zero-interest home improvement loan? 
2. How to find zero-interest loan programs
3. How to apply for a zero-interest home improvement loan
4. Alternatives to no-interest loans

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 disclose clear application windows, deadlines, or whether funds are available each year.

We recommend contacting the organization for this information and checking often for updates. Many organizations advertise these programs as deferred loans or assistance programs. In comparison with home equity or personal loans, here are several crucial differences:

Product	Use	Terms
No-interest home improvement loan	Structural, heating or cooling, and other major repairs and rehabilitation	Vary; fixed monthly payments; forgivable lien
Home equity loan or line of credit (HELOC)	Large projects, expenses, debt consolidation	Good credit required; 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 time frame determined by the program guidelines. 

These details are typically listed in the application or the program webpage, but here’s a table of projects programs may consider “essential.”

Project type	Example
Resolving health and safety issues	Removing lead-based paint or 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, such as:

• You can’t rent your home
• You can’t transfer ownership or sell
• You can’t refinance
• You can’t apply 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. In this case, 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	Amounts and terms
Zero-interest home improvement loan	0%	$40,000 – $150,000+, varies; 10 – 15 years, vary
Home equity loan or HELOC	8% – 11%	Based on home equity; 5 – 30 years
Personal loan	7% – 25%	$1,000 – $100,000+; 2 – 7 years

For example, a 10-year $50,000 zero-interest home improvement loan would cost only the amount you borrowed. But you’d pay tens of thousands more with a 10-year, $50,000 home equity loan or HELOC at 8% interest.

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

• Refer to 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. This generally refers to 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 hard-copy 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. 

You may also 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, average rates are 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 resource on HELOCs if you’d like to learn more before applying. 

Home equity loan

Home equity loans are fixed-rate loans you get in a lump sum 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, home equity loans and HELOCs can be solid 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––FICO 670 or higher––but you could qualify for more favorable rates with the following:

• Significant home equity 
• A low debt-to-income ratio
• A FICO 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