5 Ways to Finance Refurbishment Projects

Posted On Friday, 01 October 2021 20:31

Do you want to revamp your home but don’t know how to properly find good financial backing to help with the renovations? This page offers a few pointers to help you choose the best way to finance your refurbishment project.

5 Ways to Finance Refurbishment Projects

There are so many financing options to choose from, and sometimes it can be a little overwhelming, especially if all you want is to renovate some parts of your home. Before actually getting to the renovation part, ask yourself if this is necessary. 

Do you need it, or do you just want to? Also, consider if the improvement you want to make can be made by yourself. For example, you wouldn’t apply for a loan just to repair a small leak in the kitchen or maybe a few tweaks to the wall in the bedroom. Always look for ways to save up money for expenses rather than spend it on something that you can accomplish yourself. Lastly, do some research. 

Research the possible process for the renovation you want to do - be it small or large projects. Look through the various lending companies with favorable terms before signing for one. Once done with it, look into these seven things that you could meet during the whole project:

Use of Cash

Always remember to account for everything likely to be included in the cost of the project. If you have cash in your hands, it is probably an excellent choice to spend it on the project. However, will there be enough funds available for unexpected expenses? Most loan officers advise you to retain your cash to avoid problems with finance later on.

Savings

The need for a large amount of money might result in you dipping into your savings. But, of course, if you have accounted for home repairs in your savings account, then that’s good. Experts say that it is recommended to set aside about 1%-3% of your money for home maintenance. Emergency funds come in handy during these times, so if you have savings, then that’s the time you can use it as additional funds.

Apply for an equity loan

Home refurbishments projects often use equity loans as a source of funding. There are three types of equity loans: a home equity line of credit or HELOC; a home equity loan, and a cash-out refinance. HELOC is similar to a credit card, and you are given a set amount of money to use however you like as long as it doesn’t exceed the given amount. Home equity loans usually use the house as collateral. 

So if you want to apply for a home equity loan, make sure to use the money wisely, or you’ll be saying goodbye to your newly renovated house. Finally, cash-out refinance allows the borrower to replace an existing mortgage with a new one. 

Get a development loan

Getting a development loan can be one of the practical ways for you to finance your refurbishment. This does not entail that you borrow money to use solely on the project. Rather, you borrow what you need and use it as a way to buy your home, which is re-developed. Then, at the end of the loan term, you own your home. This one’s better compared to taking on an equity loan because more cash is needed for the one-off purchase of your home rather than paying interest on borrowed funds. 

If this option seems to be the most viable for your needs, you can get a development loan here.

Apply for Personal loans

A personal loan is the most commonly used loan when doing a house project. This one is because personal loans are easier and faster to acquire than home equity loans. In addition, it’s unsecured. That means there is less paperwork, and if you apply online, the money comes faster. 

However, as easy as it comes, the requirement to apply for this loan is challenging. You must have a credit score of 600 or above to be able to qualify for this. If you have a lower credit score, then maybe consider the other loans available.

Go for a 0% Financing

Zero-interest loans allow you to use the funded money without worrying about the interest when paying up for the borrowed money. Technically, it's not entirely interest-free since the interest is usually waived until the borrowed money is paid on the agreed payment date. However, this one is where the risk comes. If you cannot pay the loan by the deadline, then high interest rates await you.

Enquire with Experts

With all of this considered, you can proceed with the project as soon as possible. However, remember to always refer to a financial advisor when dealing with finance. Better be sure to avoid owing massive amounts of money to a bank or a lending company. 

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