Tips on How to Afford the Home Improvements You Need to Make

 

Planning a major home renovation? If so, you’ve most likely sketched and designed the plans as well as figured out the cost, and are now caught trying to figure out how to afford it.

As most homeowners know, whether you hire a construction crew or plan to do it yourself, any major home improvement project can be very costly. And you don’t even have the time to work saving up for it. While trying to get the best ROI, you have loans, credit, and taxes to consider before diving in on a project.

Below are five tips and options to consider when it comes to affording those major home renovations you need to make.

1. Personal/Unsecured Loans

These types of loans are good for projects ranging between $15,000 and $50,000. These loans are different in that they’re easy to apply for, offer a higher loan amount than a credit card and do not require any collateral. However, you will have to deal with higher interest rates as well as no tax benefits. Be sure to know exactly what you’re signing up for when taking out a personal or unsecured loan as the fine print may include tricky agreements.

2. Cash-Out Refinance

Though this is a longer repayment plan, around 30 years, it can help you take advantage of the housing market while building a strong ROI with your house improvement project. With this route, you’ll be taking cash out while replacing your current mortgage with a new one. This route gives you ample time to pay the loan back along with lower monthly payments. But, be aware that this route is more costly—in higher closing fees and you’ll owe more money on your mortgage again.

3. Credit Cards

Credit cards are great to buy materials and tools on, as customers can build up on their card’s point system or cash back system. Also, consider using a 0 percent or low-interest credit card for your projects.

Though putting a major project on a card might not be the best option, also consider using credit cards to fund the smaller and more affordable home improvement projects, such as installing glass doors to separate certain rooms and to let in more natural lighting. Just be sure that you can afford to pay them off on time, so you don’t risk higher interest rates or a lower credit score, which can affect other types of lending you may need down the road.

4. Cash

If you’re looking to avoid loans and having to pay interest, cash is the easiest and best financial way to pay for your rental home renovation projects. Instead of taking on the main project, say a bathroom remodel, break up the remodel into smaller projects that won’t break the bank. For instance, you can start first by repainting your bathroom cabinets, and then secure the funds for a new sink and then more funds to pay for a new shower or bathtub. Yes, the remodeling will be a long process, but more importantly, you won’t encumber the equity on your home.

5. Second Home Loan

If you’re looking for a refinancing option that doesn’t interfere with your home equity, consider a second home loan. Here you can get your lump sum of money to pay for your project without dealing with a line of credit. But, this option comes with higher rates than a first mortgage or home refinance. All in all, this option is great for those looking for a less complicated loan but still want tax benefits, such as a tax deduction on the interest.

Keep these five tips in mind when looking for ways to afford the home renovations you want or need to make.