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For a major expensive home renovation (e.g. addition, finished basement, or new kitchen) should one pay cash or finance with a loan? Would such a loan be “good” debt?
The reason for borrowing instead of paying cash for major renovations should be the same for the decision about whether to borrow or pay cash for the home itself.  Over history, borrowing using low, tax-deductible interest while increasing your retirement contributions has always yielded higher returns than paying off mortgage principal over the long term. You should first determine how much you need to save for retirement, factor that into your budget, then borrow as much as needed (and can afford) to live at whatever level of home you decide is important to you.  Using this same logic, if interest rates are low enough, it would behoove you to refinance with cash out leveraging the cash to use as additional retirement savings.