What’s the smartest way to leverage our current equity?

We currently own our house outright because my in-laws helped us out since we weren’t liquid when we bought (we were selling our 1st home and wanted to get settled into the 2nd quicker so that my son could start school.)

Currently owe his parents $125k. House is worth $392-$420 depending on what comps you’re looking at - it’s a very hot market and houses sub-$500k rarely come on the market but it’s only a 3 bed, 1 bath. Housing prices seem to go up 5-6% a year, especially as it’s become a popular place for people to move who are priced out of 2 VHCOL metros and this area, despite the rising prices, is still halfway between MCOL and HCOL.

We’ve done some basic cosmetic renovations - replaced carpets with new flooring, repainted, etc. We have longer term plans for a roof raise, dormers and a second bathroom.

Originally, I was thinking we should just take out a mortgage and pay them back. But now I’m reading about HELOCs and am wondering if we should take out more than the $125 and use the equity line to get the renovations done sooner than later, which should also increase the value of the house.

We haven’t done anything with soliciting bids for the renovations but my husband’s mom recently lost her job and I can tell she’s feeling a little anxious to get paid back, so we’re looking to make a decision in the next 2 months.

Any advice on what would make the most financial sense?

Not sure how relevant it is, but we have excellent credit and earn a combined $175k. 2 cars, with a combined $350 in payments with about $15k left on the loans.