50% of millennial homeowners are “hesitant” or “anxious” to use a bank for a home improvement loan. Learn more about this statistic and others in this newly-released summary of our Millennial Home Renovation Finance Survey.

Hearth surveyed 650 millennials on May 16, 2017. Of these, 96% were homeowners.

Dream homes aren’t dead, but they’re in danger

According a recent study from the National Association of Realtors (NAR), the largest generational group of homebuyers in 2016 wasn’t older Baby Boomers.

Or younger Baby Boomers.

Or Generation X.

It was millennials.

Despite the countless headline-grabbing stories that suggest otherwise, homeownership isn’t dead among America’s newest adults.

Our survey of 650 millennials uncovered an important truth about millennial home ownership: millennials’ journey toward their dream homes doesn’t stop on moving day. We found that almost half of millennial homeowners – 45% – want to renovate their homes.


Perhaps a couple about to start a family wants a small kitchen remodel to prepare for dinners with the kids. Or maybe the master bedroom could use some work. Or if the couple is like 17% of the millennial homeowners we surveyed, the bathroom needs an upgrade.

Regardless of the project, home upgrades come at a cost.

Millennials – 84% of whom we found are first-time homebuyers – need to make smart financial decisions about their renovations.


Often saddled with student debt, mortgage payments, and the costs of starting a family, millennials must remodel without breaking the bank.

They face tough odds.

Millennials are ill-prepared to make sound financial decisions about their home improvement projects. A recent study from the National Endowment for Financial Education found that just 1 of 4 millennials have even basic financial literacy. Fiscal illiteracy isn’t solely millennials’ fault. Financial institutions and our education system have failed to keep up with how millennials consume information and access financial services in the digital age.

Nevertheless, the costs of bad financial decisions during a renovation are high. Consequences range from piles of unnecessary debt, to costly contractor problems that can derail a project, to potential foreclosure.

And at a macroeconomic level, failure to enable smart financial home improvement decisions will leave millions of millennials unable to fulfill the generations-old dream of building toward a perfect home.

We can do better. We must.

At Hearth, we’re focused on giving millennial homebuyers the insights and tools needed to make financially savvy decisions about their renovations. Improving the status quo starts with understanding where we are.

That’s why, in this article, we’re going to give you an exclusive look into our survey results.

Let’s dive in.

Finding 1: Millennials are 7% more likely to pay with credit cards

16% of millennials are likely to finance their home renovations with a credit card, a 7% increase from other generations.

Using a credit card to pay for anything but a very small renovation is a big mistake:

After a 0% interest promotional period – usually between 12 and 18 months – APRs often skyrocket. The national average APR on credit cards is slightly below 16%. So if homeowners cannot pay off the card before the 0% period ends, then they can face a sudden jump in interest payments.

Credit cards have other drawbacks:

  • Contractors don’t like credit cards: Because of high transaction fees, contractors often resent customers who pay with credit cards. Of course contractors may pass these fees on to the homeowner. Nevertheless, because a motivated contractor is key to success, is it a good idea to impose extra fees?
  • Credit cards don’t encourage responsible budgeting: Credit card debt compounds over time – hampering homeowners from planning regular monthly payments. A lack of predictability makes effective budgeting difficult.

Financing a renovation through a credit card isn’t always a bad idea. For small projects such as paint jobs that can be paid off quickly, a 0% credit card can give homeowners points and other rewards.

Finding 2: Demand for dream homes may not be dead – but what about demand for banks?

We found that half of millennial homeowners are “hesitant” or “anxious” to approach their bank for a loan. Only 18% felt “calm” about finding a loan through their bank.


This finding should not surprise anyone who has watched millennial financial patterns. After all, we’ve seen eye-grabbing statistics such as 71% of millennials would rather go to the dentist than listen to a bank’s message.

America’s “digital native” generation turns to technology and away from banks to research and plan their home renovations. Sites such as BuildZoom give homeowners data-driven information on contractors, and Hearth saves millennials a trip to the bank by shopping around for low rates on personal loans for home improvement.

Finding 3: 64% of millennials put other financial priorities at risk

We’ve all heard that paying for remodels with cash is a good idea.

On the surface, this idea makes sense because, let's face it: who wants to pay interest?

However, using cash for a renovation puts millennials’ other financial needs at risk.

Using cash drains emergency funds

Consider this statistic:

The National Endowment for Financial Education study we saw earlier found that only 26% of millennials are sure they could come up with $2,000 if needed. A massive one-time hit to a bank account – say for a $20,000 living room upgrade – would further reduce millennials’ ability to respond to financial emergencies.

Affordable financing spreads payments out over time – leaving room for other expenses.

Paying with cash eliminates investment opportunities

There’s another reason millennials should not use only cash for projects above a couple thousand dollars: potential returns from investing.

Let’s look at an example to explain this point:

A millennial couple wants a small kitchen remodel, and has $20,000 in cash savings to spend. The couple has two options:

1. Pay $20,000 upfront: According to Remodeling Magazine’s 2017 Cost vs. Value Report, a minor kitchen remodel has a return-on-investment of around 80%. Therefore, the couple would lose $4,000 on the project. This is fine, as a remodel doesn’t have solely monetary value.

But what if there’s a way to get the small kitchen and make money or lose less? Let's look at option 2.

2. Get $20,000 in financing and invest the savings: Pretend the couple decided to get a 3-year, $20,000 personal loan to pay for the remodel. According to our home improvement loan calculator, the loan would cost around $2,230 in interest. The loan in total would cost about $22,230 over 3 years.

Meanwhile, the couple would have $20,000 in savings it didn’t spend upfront on the project.

The couple could invest $15,000 of savings in the stock market for 3 years, and spend some of the remaining $5,000 to cover payments on the loan.

Using the last 3 years of returns on the S&P 500 as a guide, the couple would have made about $3,450 in stock gains. These gains from the stock market means the couple would lose $3,780 ($18,450 - $22,230) on the remodel, as opposed to $4,000 from paying with just cash.

$3,780 versus $4,000 may not seem like a large difference. However, by keeping money in the stock market for longer than 3 years as many experts suggest, homeowners could further decrease the loss or even profit. For example, keeping $15,000 in the stock market for 6 years instead of 3 years would have increased gains from $3,450 to $9,750 – leading to a profit on the project.

Finally, financing also helps millennials afford their renovation sooner – giving their home equity more time to increase.

Finding 4: Millennials are nervous about buying fixer uppers

We found that 57% of millennials feel “nervous” or “overwhelmed” about buying a fixer upper. We don’t blame them; moving into a home that needs significant work is intimidating.


Many aspiring millennial homeowners, however, have no choice but to consider a fixer upper. A tight housing supply means just 28% of homes millennials bought in 2016 were built after 2002.

Buying a fixer upper means a renovation is unavoidable; and this apprehension suggests homeowners are nervous about whether their renovations will succeed

But here’s an insight many homeowners don’t know: picking the right payment option increases the odds of a successful fixer upper renovation.

As we discuss in our Homeowner’s Guide to Reducing Renovation Risks, picking the right financing option reduces three renovation risks:

  • Contractor Problems: Options that pay homeowners quickly, such as personal loans, help homeowners avoid contractor issues.

  • Foreclosure: Picking options such as HELOCs or home equity loans put homes at risk of foreclosure.

  • Piles of Credit Card Debt: We’ve seen how many homeowners fund their renovations with credit cards, exposing themselves to a risk of compounding credit card debt.

Conclusion: The American Dream for a new generation

The American Dream has always been linked to homeownership, to the yearning we all have to call a place our own. This dream doesn’t stop when someone buys a house.

Instead, we embark on a journey that turns a house into our home.

Home renovations are that journey.

Viewed in this context, it’s no surprise our survey found that 45% of millennial homeowners want to renovate their living spaces. Ideal living spaces let us enjoy family dinners, throw Super Bowl parties with friends, and relax after a long day at work.

These core experiences depend a lot on picking designs and contractors, but it’s ultimately personal finance that determines both whether a renovation succeeds.

If sound financial decision making drives the American homeownership dream, then we’re far from success. 25% financial literacy means 3 of every 4 millennials don't make educated decisions about their homes.

That’s why each of us has an obligation to ensure the nation’s newest adults have access to the financial knowledge and services necessary for successful remodels.

This obligation is what drives our company – and it’s why we shared these survey results with you today.