A major renovation project could have a huge impact on your family’s comfort as well as the value of your home, but paying for those types of projects isn’t always a straightforward task. That is why you might want to spend a little bit of time looking at the various ways you can fund your home renovation without breaking the bank.
The safest way to fund a home renovation is to save for it so that you can pay cash. While that financial arrangement isn’t perfect for every situation, it might be an ideal option for a smaller home project. When you pay with your own savings, you won’t have to worry about pulling out loans, restructuring loans, or using a credit card. Paying with your own money is also going to preserve your credit by limiting your debt.
Home Remodel Loan
A home remodel loan is another good option because you won’t have to borrow against the equity that you have built up in your home. Those types of loans are typically good for midsize projects such as replacing a home’s windows or renovating one or two rooms. If the renovation ends up being a much bigger undertaking, then you will need to contact an organization that specializes in loan modifications so that you can complete the project.
Home Equity Line of Credit (HELOC)
There are a few different reasons why many homeowners prefer a HELOC over any other type of loan. Those lines of credit are borrowed directly against the equity in your home, and that means the interest rates tend to be very low. As a general rule, a HELOC should only be used if the homeowner has good credit, plenty of equity in their home, and doesn’t know exactly how much the project is going to cost.
Home Equity Loan
A home equity loan is similar to a HELOC, but you are going to receive the entirety of the loan in a single lump sum. That loan is borrowed against your home’s equity and is going to have a locked rate for the life of the loan. Before taking out a home equity loan, it is important that you go over every aspect of your finances to ensure that you can make the additional monthly payments on time.
These four options are very popular, but smaller projects can often be handled with a credit card and the cash you already have. For minor fixes and upgrades, it might be easier for you to simply put the cost on an existing credit card so that you don’t have to go through a lengthy loan process.