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Wednesday, 21 August 2019
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This Old House - Do-it-Yourself

Top Ways To Finance Your Dream Home Improvement Project

Written by Posted On Tuesday, 11 July 2017 13:28

If you’re thinking about making a major improvement or renovation to your home, something you have to be prepared for is financing it.

Home renovations are expensive, and simply upgrading your bathroom or kitchen can easily cost you anywhere from ten to twenty thousand dollars.

Nonetheless, you don’t have to allow this high cost to prevent you from making the renovation of your dreams.

Here are the top ways you can finance your dream home improvement project:

Save Up Your Cash

If possible, the best way to finance your home renovation will simply be to save up and pay for it in cash. Yes, this requires time (and patience on your part), but paying for the whole project in cash can help ensure you stay within your budget and could save you money down the road.

Pay With A Credit Card

Another option is to pay for the renovations with a credit card. This will work for you so long as you know you can pay off the balance each month, and remember that when paying with a credit card you’ll also typically have to pay a higher interest rate as well.

Refinancing Your Mortgage

Refinancing your mortgage could help get you a lower interest rate not to mention a lower monthly payment. The cash you save could then in turn be used to help pay for your renovation.

That being said, you want to think carefully before actually following through with this. Since you’re essentially using your house as collateral to secure a larger loan, this also means you’ll have more long term debt. Therefore, only consider refinancing your mortgage to fund the renovation of your home if the renovations would increase your home’s overall value.

Take Out A Second Loan

Taking out a second loan, or home equity loan, is one strategy you can use to get into your equity without actually refinancing your mortgage. The interest payments with a second loan would also be tax deductible, but the trade off is the interest rate itself would be higher.

Simply Apply For A Home Improvement Loan

Finally, home improvement loans are probably the most common option for funding a home renovation. The downsides of a home improvement loan are that it doesn’t offer you any tax advantages and you may have to put a high interest rate.

However, if you have a decent credit score and not much home equity, and if you would like to pay off your renovation in the shortest time period possible (five years or so), a home improvement loan could be the best option for you. Even though you’ll be making a larger payment each month to pay off the loan, since the time period is shorter you won’t pay as much in interest.

Financing Your Dream Home Improvement Project

All in all, these are the top five best ways to finance your dream home improvement project. You must be absolutely certain that you are able to afford your project, and then you can select any of these five methods to finance it.

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