Home improvements can increase the quality of life and value of a home. The addition can provide much-needed space for a growing family, new windows can reduce energy bills, and installing a dream kitchen can increase resale value. You may be able to pay for painting or remodeling your work out of pocket, but for many people major home renovation requires some funding. There are many options for financing home improvements, each with its own advantages and disadvantages. How to finance home improvement?
First step: determine if it’s worth it
Before deciding on the type of financing, make sure that the project has financial sense. Of course, adding home additions can also increase its value, but you should not expect a return on your resale investment.
Although the addition of attic insulation, at an average cost of USD 1,343 nationwide, recovers 107 percent of its resale value, minor kitchen remodeling, an average of USD 20,830, recovers only 80 percent. And adding a bathroom, on average $ 43,232, allows you to recover about half of its cost.
The best ways to finance home renovation:
Getting a personal loan is a great option for medium-sized projects at home, such as bathroom remodeling or window replacement. Whether you employ a professional contractor or do the work yourself, a personal loan can help offset some costs or pay for the entire project.
Personal loans have many advantages. First of all, it’s easy to find them. You can apply for a personal loan through banks, credit unions and many different online lenders. Before submitting your application, compare the best lenders who offer the lowest interest rates, the lowest (or not) fees, friendly repayment terms and quick payouts.
Equity credit line (HELOC)
It is a revolving credit line, like a credit card. At first you are only responsible for paying interest monthly; in later years you have to start paying back the principal amount. The advantage of this type of debt is that you don’t have to charge all the money at once for your project; if necessary, you can draw gradually. After this initial “drawing period”, HELOC turns into a fixed loan and you will have to pay back the principal amount according to the agreed schedule.
According to a survey by Angie’s List, a page with contractor reviews, two-thirds of contractors now accept credit cards². Some also allow you to pay monthly installments by credit card instead of a lump sum. This is certainly a better option than cash because most cards offer some form of fraud protection. However, the APRC on a credit card is often higher than on other credit lines, and if you can’t repay your card quickly, you can finally pay a large sum of financing costs.
The terms of the loans for home renovation vary considerably, depending not only on the lender but on the assessment of the borrower’s creditworthiness and history and the amounts involved. No matter what financial form you are in, you probably have financing. But regardless of what type of loan you are considering and what type of lender you want to work, shopping around will help you get the best rate and loan terms for home renovation.