Are ready to finally start that home improvement project but don’t have the cash on hand to complete your desired renovations? it’s time to start thinking about home improvement finance. Home improvements can certainly be expensive. There are a variety of options when it comes to financing your home improvements.
Here’s what you should know about the different types of home improvement finance.
If you could benefit from refinancing your mortgage, possibly with lower interest rates, this could the best option for your home improvement financing. It’s important to take into consideration the costs of renovation that are spread over the years. Of course, you don’t want to be repaying the costs of your home improvements for longer than those renovations will actually last.
Home Equity Line of Credit
If refinancing your mortgage isn’t an option, or you have great rates already, a home equity line of credit may be a great option for you to get those home renovations completed. There are a few considerations with a home equity line of credit. With this home improvement finance, your equity line allows you to draw money out for your renovations as required. You simply pay it back at your own pace. It’s important to remember that if you don’t make the required minimum monthly payments, you could lose your home. This type of financing for your home improvements should be carefully thought out.
A construction loan is a great option for new home building or when you’re starting a major renovation that will require more funding than what’s available from the equity on your home. This type of home improvement financing may be difficult to find, and they can be quite cumbersome. Funding for this type of short-term financing is only released once pre-set stages of work are completed, and when the renovation is complete. This loan is generally transferred into a traditional mortgage.
Borrow from your 401 (k)
Most retirement programs, like 401 (k), have options to borrow from the savings account. This allows you to repay the amount over a period of time. The payments are generally deducted directly from your paychecks. It’s important to keep in mind that if you ever leave your position, the remaining balance of your 401 (k) loan will be due immediately.
Your credit cards may be a valuable, and beneficial, source for funding your smaller home improvement projects. In some cases, the rewards some credit cards offer from the amounts you spend can come in handy. At the very least, use your credit cards to pay for the materials needed for your project. The reward points can offer additional benefits while giving you the opportunity to pay the balance off over time.
This financing option for home improvements should really only happen as a last resort. While some contractors will offer their assistance to arrange the funding for your project through their relationships with finance companies, this often comes at a very steep price. So keep your finances organized and your banking information handy when considering the investment.