Whether you have just bought a home recently or you have been living in it for years, sometimes it needs a little care. But home remodeling can bring a lot of finances that are not always available in your bank account.
Luckily, several auto refinancing options that you can use to pay for your home remodeling if your cash flow is running low.
In this article, we will discuss six excellent ways to finance your home improvements.
Should I finance my home renovation?
How you will pay for your renovation depends on the size of the project and your financial situation. Sites like Wealthry.com help you save up funds for your specific home remodeling project and is an ideal way to pay for home upgrades. However, it is not always possible since emergency expenses and massive remodeling projects can make financing necessary.
To get to know if it is the right time to renovate your home or not, you’ll need to consider your monthly income and budget. Then, compare it to the return on the investment you will make in the project and the size of the project.
If your financial health is excellent and the project you are planning to do will significantly increase your home’s value. The extra cost of financing could be worth it.
Here are the six best ways to finance your home renovation.
If you have decided that you are going to refinance your home renovation, you have several options that include
1. home remodelling loans
Home remodeling loans are unsecured loans given by business finance like creditors, banks, unions, and online creditors. Since they are unsecured, it is not a must to use your house as collateral to qualify.
For you to be eligible for these loans, all you need is a good credit score. The better your credit score is, the faster you will receive the funding once you agree to your lender’s terms and conditions.
Home remodeling loans usually have a shorter repayment period, and they also have smaller fees than HELOCs and home equity loans. As a result, they are generally used for smaller projects like kitchen remodeling and bathroom makeovers.
Since these loans are unsecured, they usually have a higher interest rate than home equity loans and HELOCs, especially if they have a poor credit score. Therefore, before applying, remember to compare different lender fees.
2. Home equity lines of credit
HELOCs are the most popular way of financing home renovations. HELOCs are secured loans guaranteed by your home. Furthermore, they are revolving credit, meaning you can take whatever you need and when you need it. As a result, they have varying interest rates.
If you have lengthy home renovation projects, HELOCs are the best financing option since they allow you to get quick financing funds.
The only downfall of this type of loan is that it comes with a major prerequisite: to borrow again, you need to have sufficient home equity. In addition to this, payments can also increase depending on market fluctuations.
- Home equity loans
If you are uncomfortable applying for HELOC, you can apply for home equity loans or second mortgages. One advantage of applying these loans is that they are paid out in sums, and you can repay them over several years, but in regular fixed monthly payments.
Unlike HELOCs, you don’t have to worry about market fluctuations, but the only downside is that you will have less payment flexibility.
If you know precisely how much your home remodeling will cost, home equity loans are a perfect choice. However, if you do not make your repayments on time, your home could be foreclosed.
4. Credit card
If looking forward to having a minor bathroom fixed or installing a new closet, using your credit card can be the best option. However, this is always ideal when using a 0% APR credit card, since you will not be paying for interest.
Furthermore, today several credit cards reward the user for spending on renovation. Note that there is quite a high risk associated with making extensive home upgrades using your credit card.
Some of these risks include higher interest rates if you don’t settle your debt before the 0% APR introductory period ends. Another risk is varying high interest rates depending on the market.
5. Mortgage refinances
Mortgage refinances replace your current mortgage with a new one that has higher interest rates. The good thing about mortgage refinances is that you can cash out the refinances and make home upgrades.
The downside of using mortgage refinances is that you will need to extend the repayment period, and you will have to pay the original fees, taxes, and other closing-related fees.
6. Government loans
Government loans are another way of financing your home improvements. For you to qualify, you will need to save the cost of interest and insurance.
HUD Title 1 Property Improvement Loan is one type of government loan that you can borrow up to $30000 without having any equity in your home. For this reason, it is always ideal for home repair and some upgrades in your home. For you to qualify for this loan, the money must go towards renovation to enhance the condition of your house.
The veteran’s affairs guarantee cash-out refinancing with 100% of home value even if it can’t make the payment, but these loans are only meant for the army and police officers.