If you’re looking to renovate your home, you’re surely excited about all the possibilities. From remodeling your kitchen to adding a new bathroom all the way to completely changing the layout of your home, the options abound. But, there is also an aspect of home renovation that can be daunting – your finances.
Once you’ve put everything you want to do on paper, you have to see how much money such updates will require. If you realize that you don’t have the necessary funds on hand, you will have to look into the ways how you can finance these works. Here are some approaches to consider.
Consider refinancing your mortgage
In case you currently have a mortgage, you can look into refinancing it. This approach will potentially provide you with lower interest rates and a longer loan term, which would make your monthly payments smaller and allow you to save some money each month. Moreover,if you have enough home equity, you can even opt for a cash-out refinance that will provide you will a lump of money you can invest in your remodel straight away.
Find a Home Remodel/Repair Loan
To finance your renovation, you can also shop around for home remodel and home repair loans. As these personal loans offered by banks, credit unions, and online lenders are unsecured, you will not have to use your home as collateral. Your interest rate will be determined by your credit score and you can usually get the funds quickly, sometimes even within a day. However, make sure you look into fees and repayment terms before you sign any documents, in order to find the best deal.
Look for Home Equity Lines of Credit
Another popular way to get the necessary funding for a home renovation is applying for home equity lines of credit or HELOC. This secured type of loan will be backed by your home but can allow you to get lower interest rates as opposed to an unsecured personal loan. Keep in mind that this option is only available if you have sufficient home equity.
Get a Home Equity Loan
While a HELOC will allow you to borrow money as needed, a home equity loan will give you all the cash at once. Moreover, the interest rates are usually higher than those of home equity lines of credit. It’s best to consult with a professional to see which of these two options is better for you if you qualify.
Apply for a Business Loan
As working from home is more and more popular, it’s only normal that you might have to invest in your home office. In that case, you can also consider applying for a business loan that will help you set up your company and help it run smoothly. You can look intoflexible hybrid loans that let you design a loan in a way that best suits you. What is more, you can find unsecured loans as well as lenders that don’t impose any early repayment penalties.
Use your Credit Cards
If you have a credit card or a few, they can also be used for some minor works around the house. For instance, installing new closets or buying new appliances for the kitchen with your credit card is a great option as some cards are interest-free for the first couple of months. Moreover, some cards even give you rewards when you spend money. However, you should repay the balance as soon as possible as credit cards are known for high-interest rates.
Research Government Loans
In case none of the above-mentioned ways are available to you, you can perhaps qualify for a government loan. Of course, government loans depend on where you live but in many places you can find financing that will help you make your home better. For example, in the U.S., there are home improvement grants offered to veterans and Native Americans while in Australia, there is the HomeBuilder program.
Turn to Relatives for Help
In many cases, people ask their families for help with home renovations. Maybe your parents have some savings that they could loan or gift you. Maybe you have some extended family or friends that can chip in. With that in mind, it’s important that you discuss this contribution. If they expect the money back, see how much time you have and whether they will apply any interest rates. Being honest and upfront about these things is the best way to avoid arguments about money and potentially ruined relationships.
Wait Until you’ve Saved up Enough
Finally, if you don’t have the necessary funds, consider waiting a bit until you can save enough money. In case the issues you have with your home are purely aesthetic and everything is working properly, perhaps you can put off the works for a few months or a year. During this time, create a money-saving strategy and see which costs you can cut to afford the home renovations.
As you can see, there are many ways how you can finance your home remodeling project. From refinancing your mortgage to taking out various loans all the way to waiting until you’ve saved enough, take all the pros and cons into consideration before you decide.