At some point, you can’t ignore your need for home renovations, even though the thought of this may stress you out a bit.
Yes, improvements can be expensive and a little inconvenient. You have to deal with all that noise and those contractors in your home, but they’re necessary. The following are a few ways you can finance your home renovations.
One option is to save. It may be a wise thing to do, but you have to make a few adjustments if you want to save for your home renovations. You don’t only have to calculate what you need; you also have to save that amount of cash.
You’ll need to cut costs, sometimes sacrificing things you love to do, like going out to eat or going to the movies. If all that isn’t enough, you will need to resist unnecessary purchases. Saving also takes a long time. Usually, only a small amount of your check goes into your savings fund. Even folks who make a lot usually have a lot of bills to deal with, making it hard to save. Still, if it’s something you can do, you should try.
Special Renovation Loans
You could apply for a renovation loan. These types of loans are for these sorts of projects, and all you have to do is apply to them. Granted, you will have to get approved for the loan, but it’s a good option. You will have to pay attention to the small print; make sure the interest rate isn’t too high.
There are a number of these kinds of loans available, like the home renovation finance option for people with bad credit. The interest rate on these loans is going to be much higher because the lenders are taking a bigger chance on you. If you choose these sorts of loans, be sure you can make the monthly payments comfortably.
Using Your Equity
There are two ways homeowners use equity to renovate their homes. One is by creating a line of credit against your home, and the other option is a home equity loan or a second mortgage. Both of these provide you with a large amount of cash that you can use to renovate your home. There are a couple of downsides, like the fact that you will need to pay these loans back at a significant interest rate.
This isn’t to say that the interest rates are high. They’re kind of low in comparison to some of your other options, but they’re still there. If you fail to pay back, your home could be in jeopardy since you put your home up as collateral. Your lenders could take your home to repay this debt. That’s a big gamble, so make sure you’re ready to absorb the payments you’ll need to make before taking on any of these loans.
Cash Out Refinancing
For this option, you’re replacing the mortgage you have with a larger one to pocket some of the cash. The extra money you get can help you make the necessary renovations. If you were close to paying off your mortgage, that is not the case anymore.
The interest rate might be higher, so you’ll end up paying more each month. You will have to pay all costs associated with a mortgage, like an appraisal fee, the origination fee, taxes, and even those annoying closing costs on top of everything else. Most financial advisors will tell you to avoid this option unless your interest rate is somehow going to be lower than it is now.
Working Credit Cards
Credit cards could be good or bad. It depends on your particular situation. If you find a credit card with a good introductory period, like having a zero interest rate for the first few months, then you’re good. Couple that with renovation costs you can pay back before the introductory period is over, and you’re golden.
If you can’t pay back before that introductory period is over, that’s a problem because interest rates shoot up quickly after that period. Then, you end up with some of the highest interest rates out there. You don’t want that. It could put you in a financial bind. If the renovations you need to make are too big, then skip the credit card route.
The government loan option can be good for some homeowners. It allows you to make renovations without having equity. You don’t have to worry about having good credit or high interest rates. You could even find a reasonable payback program.
When you apply for these kinds of loans, they come with limitations. The type of renovations you can make are normally the ones that improve your quality of life. If you had something else in mind, you probably won’t get the loan. It may be a good idea to talk to someone about these types of loans before you apply to make sure you’re a good candidate.
Financing renovations isn’t easy, but you’ve got a few paths to choose, and these aren’t all of them. Some folks ask family or friends for a loan instead of a financial institution, but it’s up to you.