Home renovations are not cheap. Something as simple as replacing the faucet or repairing the window may not cost much. But when you take on a significant renovation project, you will need to be prepared financially. And the more areas you decide to renovate, the more it will cost you. Fortunately, there are several ways you can refinance a home remodeling project. Take a look and see which one works for you the most.
Save Up the Money
This is the safest way to pay for your renovation projects. You will finish up without any debts or interest waiting for you at the end. If you are yet to save up, this option means waiting till you have enough money to start your projects. But it also means you will not have to worry about repaying a loan to a financing institution. While saving up, you can also make a list of renovations you can DIY. This is a great option to save money on labor. This financing option is ideal for homeowners that are not in a rush to renovate their homes. If you are remodeling your home to sell and do not have the cash, this option may not be the best.
Credit Cards
If you are doing a small renovation like remodeling the bathroom, using credit cards to refinance your projects may be good. You can get a 0% APR credit card which is interest-free for the first few months. You need to have a good credit score to qualify for these cards. Certain risks are associated with remodeling your home using credit cards. For instance, if you fail to repay the balance within the stipulated time, you may face high-interest rates. This financing option is ideal for a person doing small projects and who will have managed to pay back the money before the high-interest rates kick in.
Home Equity Line of Credit (HELOC)
With HELOC, you can borrow against your home’s equity. Most lenders are willing to lend up to 85% of the value of your home. This type of loan usually has lower interest rates because your home secures it. And since it is also a revolving credit, you can make money anytime you need it until you reach your borrowing limit. This allows you to get enough money to buy what you need, hire a remodeling contractor and start your projects immediately. When using this type of financing, be sure to have a repayment plan in place. Otherwise, you risk losing your home, which you have worked hard to transform.
Government Loans
The government offers loans to qualified homeowners that want to remodel their homes. A good example is Title 1 loans, where you can borrow as much as $25000 with repayment terms of up to 20 years. This gives you enough time to repay the loan. However, you are limited in the renovations you can do. In short, you only do renovations that enhance the livability of your house. That means some upgrades may not qualify.
Personal Loans
A personal loan can help you finance your remodeling project quickly. Most lenders will give you funding within a week of applying. Personal loan interest rates vary depending on the lender, but they can range from 6% to 36%, which is higher than HELOC or credit cards. Customers with excellent credit scores usually get lower rates. The repayment period for a personal loan can be 2 to 7 years. A longer period means higher interest rates and vice versa.
If you are ready to remodel your home, these are the financing options you can consider. Choose the option that works best for you and will not strain you financially or put you at risk of losing your home.