One of the best things about owning a home is that you can do anything you want with it. If you don’t like the layout of the house, you can knock down a few walls and change things up. If you want a new kitchen, spring for a remodel with all the newest appliances.
However, these types of things cost money, especially if you want them done right. The question is, how are you going to pay for your remodel or updates?
Not sure what your house renovation financing options are? Keep reading for our best suggestions for financing renovations.
One of the most advisable methods of paying for your renovation is by using the money you already have. This can be extra money in your checking account or money you have in savings.
There are pros and cons to this approach. On the one hand, if you use the money you already have, you won’t owe any interest on the money spent on renovations. However, taking several thousand dollars out of your checking or savings account may leave you vulnerable in the event of a future emergency.
Take Out a Personal Loan
Using a personal loan or home improvement loan is one of the most common ways of financing renovations. If you have decent credit and can get approved for a low-interest rate, this isn’t a bad way to go.
However, if you take out an unsecured personal loan, your interest rate will be quite high. This can cost you hundreds of extra dollars (if not more) over the length of the loan.
Take Out a HELOC
Home equity lines of credit are a great solution for how to finance a home renovation. Using the equity of your house as collateral, you have much more flexibility in terms of the loan amount, interest rates, and payment plans.
The downside of HELOCs, however, is that failure to pay can result in forfeiture of your home. On the flip side, using a HELOC for your home renovation allows you to use the expenditure as a tax credit.
Use a Credit Card
Financing home renovations with poor credit can be difficult, if not impossible. While you could take a few months to improve your credit score to get better loan terms and eligibility, this takes time and patience.
If you don’t have the time (or the patience), consider using a credit card to fund your home improvement project. Be advised, however, that most credit cards have exorbitant interest rates. If you don’t pay it off quickly, the interest charges are going to hurt.
Refinance Your Home
Lastly, think about refinancing your home to gain access to positive equity. This is a great answer for financing renovations.
If you’ve owned your home for several years and have been making regular payments, you likely owe much less than the home is worth. Additionally, your home’s value has probably increased since you’ve owned it.
Schedule a home appraisal to get a current evaluation of your home. Then, reach out to a credible mortgage company and inquire about refinancing.
Looking for More Tips on Financing Renovations and Other Home Improvement Advice?
No matter what, when financing renovations, there will be pros and cons. Fortunately, as long as you pay off the loan quickly, you’ll reap the rewards of improving your home. Your home’s value will increase and it will be much more luxurious, comfortable, and modern.
If you’re looking for more home improvement advice, check out some of our other articles before you go. Our blog is a hub of information created for homeowners like you.