How Do I Pay for a Remodel?
Remodeling projects are exciting ways to breathe new life into a space and really make it your own. They also require careful financial planning. While some people prefer to save the funds required for the project or pay piecemeal, there are several other ways that homeowner’s finance their projects. The financing option that makes the most sense will depend on your individual cash flow and personal preference. Here are some options that you may not know about to help you finance your next project:
1. Secure a loan
A loan may provide you with better interest rates and a longer payback term, but there are many different applicable loans available. Many homeowners starting a remodeling project today start by looking to their mortgage broker, rather than a personal bank loan. There are several financial programs to sift through, so pre-planning is a must. Determine your estimated budget beforehand so that you can narrow down your search to loans that make sense for your project.
Small remodeling projects may fit well into your budget on credit. If you can pay off a project easily in a couple of months, it is probably more economical than applying for a loan. If you have a card with a 0% APR for a certain amount of time, take advantage of your purchasing capacity, as long as you can pay the total before the promotional period ends.
3. Cash-out refinancing
You may be eligible for this form of financing if your property value has increased and you’ve paid down your home loan. Talk to your mortgage broker about refinancing with the cash option. Your monthly balance may increase for a time, but you will have the cash flow necessary to complete the project. Carefully consider the interest rate for the project and the expected increase to your home’s value that the remodeling project will have. You may only have access up to 80% of the home’s value, so carefully consider what you currently owe and the home’s total value before deciding to take this route.
4. Find energy efficient incentives
Think out of the box for remodeling projects. You may be able to significantly reduce your overall costs by implementing green technology. Look into tax incentives and rebates for installing appliances and energy solutions to make your project more affordable.
5. A federal home improvement loan
The Federal Housing Administration offers two loans that are specifically designed for remodeling projects. One loan will provide you with up to $25,000 that is insured against default. The other is for housing that requires more work and there are a few different options to help you rehabilitate the property.
6. Leverage your home equity credit
You can choose to use your home as collateral to take money on credit from the total appraised value. Look at the interest rates for these credit options versus a traditional loan. One may provide you with better overall rates for a larger remodeling project.
With some careful planning, there are several viable options for homeowners looking to remodel. If you’re looking to remodel, look no further than the professionals at RH Homes. Make a budget and stick to it to ensure the debt is managed appropriately, and we can help you remodel the home of your dreams!