Improving our homes can be a huge step towards increasing our quality of life, making it safer for our loved ones, and enhancing the value of the property itself. Unfortunately, there’s no such thing as an inexpensive improvement, and most Americans don’t have the necessary capital on hand.
These are the top ways to fund your home improvement: and why it’s not impossible to pay back:
Home Equity Loan
A home equity loan is possibly the most common way that people pay for their renovations. Borrowing against the value of their home, based on where it is before the upgrades, you can bottom-up to eighty percent of the value of your home if you own it outright.
Unfortunately, some renovations and changes may cost more than the amount you can borrow. This means you may have to seek out a second type of loan or try to save up to cover the rest.
Line of Credit
A line of credit is the best option if you’re doing the work yourself and need this loan as a continuous line for long-term renovations. When you apply, you’ll create a credit line that you can access at any time up to your credit limit and only pay interest on the loans that you use.
As you pay off your balance, you can continue to borrow unused funds without reapplying. It would help if you didn’t take on more than you can afford and look into how much the interest will be early on.
If you want to completely renovate your home from the studs up and need a large sum of money: you can borrow up to ninety percent of your home’s current value by using a homeowner mortgage. This option usually has lower interest rates than many personal loans or equity loans, but borrowing against your home can be risky. Therefore, this is an option you should only take if you’re entirely sure you’ll be able to pay it back.
A personal loan is better for smaller renovations, anything that won’t cost more than $35,000. This could mean finishing a room that needs it or a small kitchen remodel. Although this is a small amount of money compared to the other items on this list, it’s still a worthy option for those who need it. Using this to fix up a bathroom or turn a bedroom into a master suite can be worth it!
A construction loan is similar to a home equity loan or an NRIA loan, except the lender considers the final value of your home after the renovations. This allows you to borrow more and put in the money and worth needed for the full renovation. You don’t receive the entire amount upfront, it’s staggered over months, but it’s a great way to pay for a renovation you wouldn’t be able to afford otherwise.
Home renovations ensure that all properties are livable and modern regardless of your financial situation, so don’t be afraid to try one of these options to find your best bet!
*Photos by Blue Bird