The amounts spent on home renovations projects are up by 15%. Kitchens, home offices, and outdoor spaces are some of the main targets of renovation. If you’re planning to remodel your home, one of the major constraints to your project is to find financing.
The good news is there are several ways that you can come up with the money to fund your remodeling project. From tapping into your savings to refinancing, you can get your hands on your dream house using any of the options below.
Traditional Sources of Financing
According to experts at Ryan Kelley, there are several financing facilities that are available to homeowners. From home loans to cash-out refinance, it is possible to get the money and renovate your home. Getting a home improvement loan is one way to pay for renovations at your home.
These types of unsecured personal loans are offered by banks, online lenders, and private financial companies, among others. Qualifying is largely dependent on your credit reputation. The advantage of this type of loan is that it is quick, meaning, you can get your money in a day if everything goes smoothly.
Another way is to opt for home equity line of credit (HELOC) which is a secured loan and offers lower interest rates than an unsecured personal loan. It is ideal for ongoing or extensive renovation projects. If you have adequate equity on your home, you can also use this to refinance your mortgage.
Since it works like a revolving credit, you can access funds when you need it or up to your loan ceilings. Be aware though that since you’re putting up your house as a collateral, it’s essential to keep up with your payments on time or you risk your home being foreclosed.
Another con to HELOC loans is that they use variable interest rates which means that your payments can increase depending on the behavior of markets.
More Loan Options
In addition to tapping your home equity, you can also use a second mortgage which will provide you with a home improvement loan. Usually paid as a lump sum, it is possible to repay it over a determined period like several years with fixed monthly payments.
The upside to this alternative is that you do not have to worry about market fluctuations because you’re locked in at a group rate. Unfortunately, you should still be vigilant and make sure that you keep up with payments, otherwise the banks can seize your property.
If you need a bigger loan, a cash-out refinance is another alternative. It essentially replaces your current loan with a new or larger one. It also offers a new interest rate. The advantage of this type of loan is that you could use the extra money to refinance your home.
However, the cons of this project are worth studying. Remember that you need to take account of fees for appraisal, taxes, and origination costs. You must also check that the interest rates you’re paying are favorable.
Do note that missed payments are going to affect your home since too many can lead to home foreclosure. Otherwise, credit cards are also viable options for smaller renovation projects.
Renovation projects are sometimes necessary to preserve and improve the condition of a home. Granted that there are several ways to finance a remodeling project, it is equally important to study the terms of your loans closely to see if you are getting a good deal and determine your capability to repay.