If you have ample savings and are willing to use it to finance your remodeling project, you can avoid borrowing altogether, of course. Most CR readers, according to our surveys, do just that.

But before you write any checks, you might want to weigh the opportunity cost. That is, how much could your money earn if you kept it invested and simply borrowed to cover the project?

A safe, five-year bank CD would earn you about 5 percent now, compared with the 8 percent or so you’d pay to borrow against your home equity. In that example, paying cash is probably smarter than borrowing.

If, however, you could earn more than 8 percent on your money, borrowing starts to look more attractive. For example, Vanguard’s 500 Index Fund, which invests in stocks, has returned an average of 8.4 percent a year since 2002.

When you factor taxes into the equation, borrowing looks even better. If you’re in the 28 percent tax bracket and itemize, an 8 percent home-equity loan costs you only about 5.75 percent after you deduct the interest. Meanwhile, capital gains taxes would take a bite out of that 8.4 percent stock return, but you’d still get to keep about 7 percent.

Bear in mind, however, that borrowing, unlike using cash, puts your home at risk if you can’t repay.