That home-improvement project may provide you with all the extra space and oomph you require. But how are you going to pay for it?
Here’s the deal: homeowners spend between $14 and – 45,000 on renovating their place. What’s more, more lavish home renovations can cost north of $200,000.
That said, many aspects of home renovation are adaptable. You can always change the color of the walls or nudge them a few inches. But one thing is sure; you require a significant amount of money.
Money is, in fact, the primary source of your home remodel. It appears at the beginning as a deposit, and it reappears at the end as a final payment.
Being upfront about your remodel payments is essential to assuring a quality finish.
However, borrowing money for a second-story addition, a new kitchen, or any other home remodel meant seeing a loan officer, going to the bank, and hoping for the best.
But as of today, there are many more intelligent options for financing home improvement projects.
Care to know more about this?
Whether you have money saved or plan to take out a loan, here are some of the best and most innovative ways to find funding for home improvements:
- Cash
In New Zealand, the first step towards renovating your home is the council’s approval. Once you get that sorted, it’s time to see how much you’re willing to spend.
Pro Tip – Google the term renovation costs in NZ to estimate renovation costs.
It would be best to structure your finances, so you don’t overspend. So set up an automated savings plan and use the opportunity to practice the virtue of patience.
Or, if your home requires critical repairs (such as a leaking roof), don’t wait until you have more money to fix the problem.
But before you go all-in with your cash payment, ensure to talk to various renovation companies and services providers to determine which offer best suits your financial needs.
This is especially important if you live in New Zealand, where people tend to spend thousands of dollars on renovations.
- Credit card with no interest
Consider this option if you only require a small sum of money and have the financial discipline to treat the credit card as if it were a regular loan.
Credit card debt is not something to be taken lightly. Understand thyself! However, suppose you’re financially disciplined, and your project is small. In that case, a 0% card deal is a simple and effective way to get an interest-free loan as long as you pay it off quickly.
Also, before you make a decision, take out your magnifying glass and read the fine print for any hidden fees. Then, treat the amount you put on the card as a regular loan.
Put nothing else on the card, set up a payment timetable, and pay off the balance before the 0% period expires. If you do not pay it off by the time limit, you may be charged the total amount of interest.
- A loan for a home equity
Do you have equity in your home and require a large sum of money for a project? A home equity loan may be the best option, also known as a second mortgage.
You must qualify, satisfy the lender’s requests, and pay various fees, just like a first mortgage. Interest rates are typically higher than for a first mortgage. However, they are still favorable, and the interest may be tax-deductible.
Typically, the term is 15 years or sometimes less. If necessary, the loan can be remortgaged later, but you must pay off the balance if you sell your home. Keep an eye out for upkeep fees and penalties for paying your loan early.
Remember that whenever you tap your home equity, you are overturning the equity-building process and putting your home up as collateral. If you fall behind on your monthly payments, you may face foreclosure.
As a result, many financial advisors believe that the only valid reason to use your equity is to make home repairs or advancements that increase market value.
- Refinancing
Refinancing may be the best option for an extensive, costly remodel. You’re likely to get the best interest rate possible on the money you need for the project.
You’ve most likely heard of refinancing to save money on your mortgage when interest rates fall. It is also a method of obtaining equity from your home. Furthermore, interest is usually tax-deductible.
A “cash-out refi” replaces your old loan with a new, bigger one that pays off your mortgage, includes the new closing costs, and leaves you with cash.
Remember, you’ll spend the wealth you’ve amassed in your home, and you’ll have to decide whether it’s worthwhile.
Also, keep in mind that if you do not have at least 20% equity in your home, you may be required to purchase mortgages, which will raise your monthly payment even further.
- Loan for Home Improvements
Suppose you don’t qualify for a home equity loan. In that case, you could look into a personal loan for home improvements from an online lender, a credit union, or a bank.
You are not required to use your home as collateral in this case, but the interest rate may be higher because the loan is unsecured.
Your credit score determines your interest rate and qualification for a home improvement loan, and funding is provided rapidly. These loans typically have shorter repayment terms, lower lending amounts, and lower fees.
The problem with a personal loan is that you’re going to pay a higher interest rate, and you’re going to have a shorter repayment term because there’s no collateral.
Suppose you plan to use a personal loan to finance your renovation work. In that case, they are best suited for small to medium-sized projects like kitchen appliance upgrades or window renewal.
Conclusion
It is clear that gathering funds for a home remodel isn’t a piece of cake – there’s a lot of planning involved.
That said, all homeowners must perform their research, look into all plausible options and pick a path best suited for their needs and financial situation.
And the paying options mentioned above are enough to nudge you in the right direction and allow you to give your home the sparkle it deserves.
Lastly, before you go, don’t forget to compare and contrast your options to discover the best terms.
