You might be planning to upgrade your home to accommodate your changing needs or are preparing to sell your property. Despite your reasons for remodeling, upgrades and additions are a huge ordeal to tackle. One of the most meaningful questions you’ll have to ask yourself during the planning phase is how you’ll pay for the project. Having a plan on how you’ll pay for the renovation will help you stay away from problems in the future.
In fact, you can find numerous financing options that will help you pay for the upgrades, depending on your goals and credit profile. It’ll be best to think about all your financing options throughout the project so that you can make informed decisions.
Below are a few financing options that will help you transform your house.
How Will You Pay for the Renovations?
Finding the best financing method will depend on your project’s complexity and financial situation. Most homeowners are used to saving up money and using those funds to pay for the renovations; however, that’s not always possible. More extensive renovations and sudden expenses will force you to consult a mortgage lender. It’ll help you think about your return on investment, the project’s scope, and your monthly budget.
Taking out a new loan can be worthwhile if the renovations can increase your property’s overall value and you have the financial resources to pay back what you borrowed. Here are four options you can choose from when it comes to financing your renovations.
- Home Remodel Loans
Home remodeling loans refer to unsecured personal loans offered by online lenders, credit unions, or financial institutions. Because they’re unsecured, lenders will not use your property as collateral. Your credit profile will determine if you’re qualified for a home remodel loan and the interest rate you’ll be paying for.
Once you agree to their terms, most lenders will deposit the money into your account within the day. That makes home remodel loans easier to obtain. But due to their unsecured nature, they have higher interest rates than home equity loans, especially if you don’t have a good credit profile. Other lenders even charge for pre-payments, late payments, and application processing.
Make sure to compare different options so that you can find the ones that offer the quickest payouts, most reasonable repayment terms, most competitive rates, and most affordable interest rates.
Home remodeling loans are best for homeowners with a poor credit profile.
- Home Equity Loans
You can also opt for home equity loans, which creditors often call a second mortgage loan. Like home improvement loans, you’ll receive a lump sum that you’ll have to settle within a fixed number of years in regular monthly payments. Market fluctuations will not cause any problems. Most lenders will have a fixed interest rate, so you’ll only have to settle the same monthly payments.
Home equity loans can be an excellent option for you if you’ve calculated the costs of your renovations. That’s because you’ll receive the money upfront. However, keep in mind that this option will use your property as collateral. Foreclosure of your property is a huge possibility if you fail to settle your loan.
It also means that you’ll have another monthly payment, in addition to the initial amount you’re already paying for. It’s another excellent option for homeowners who can pay for an additional charge on top of this loan and those who need a lump sum upfront.
- Credit Cards
Your credit cards are another means of financing your renovations. You can use them for installing a new cabinet or upgrading the bathroom’s vanity mirror. One of the most standard benefits of using your credit cards is that most creditors will not charge you for the first few months. You can also do minor upgrades without paying for the interest when using a zero-percent credit card. Most cards also offer rewards.
Hence, you’ll get more cashback the more you spend on renovating your house. Unlike other financing options, your creditor will also charge a higher interest rate once the introductory period ends. If you’re using your existing card, you might have to settle what you borrow within the billing cycle to avoid getting charged more.
Only individuals planning for minor upgrades and who can pay back what they borrow are best qualified for this option.
- Government Loans
If you apply for a government-supported loan, you can save more on insurance and interest rates. One standard example is a HUD Title I Property Improvement Loan, which offers a certain amount of money without equity. It’s the best option if you recently bought your house and need to renovate it; however, you can only use the money for upgrades or additions that improve your home’s livability.
You can’t use it for other additions. Likewise, not all homeowners or projects qualify for a government-funded loan, and their terms have specific requirements. But they’re much better than private loans. It’s an excellent option for a homeowner who fits the particular requirements of the loan.
You’ll have to plan carefully to find the best financing option for your project. Make it a habit to weigh all your options carefully before choosing one so that you can find the one that’s best for your financial situation and project. In considering all your options, consult a few lenders for assistance.