Financing Your Remodeling Project, Part 1
- Aug. 25, 2015
- Courtney Lynch
- Home Life
Remodeling your home can add value to your property and help tailor the space to your needs and preferences. However, while having a customized kitchen or renovated master bathroom might sound wonderful, the process may be a bit intimidating. Knowing what options are available to you and how you can afford various remodeling projects can help you kick start home improvement this spring.
Pick a Project
Before heading to your bank, mortgage broker or dipping into a savings account, decide what renovation is most important to you and your family. If you are looking to add value to your home because you plan to sell soon, your priority projects should involve features that will interest potential home buyers. According to Kiplinger, some renovation projects buyers will likely pay more for include:
- Extra Storage Space
- Updated Kitchens
- A Separate Laundry Room
- Energy Efficient Features
You may also want to tour other homes for sale in your area and see what comes standard in your neighborhood.
If you are remodeling in the home you plan to stay forever, selecting a project should depend solely on your preferences. Discuss options with your family and rank whether you'd rather have an in-ground pool, game room in the basement or update your bathroom. Knowing what everyone in the family prefers can help you narrow down your choices so you can start renovating.
Establish a Budget
Know how much you can spend on your project. Whether you are taking out a home equity loan or paying cash, it is crucial that you create a budget for yourself. To get a clearer idea of the average cost associated with a renovation project, reach out to a few different contractors and ask for estimates. This can help you grasp how much your specific project will likely cost and give you a number you can work around and tailor your budget to.
Research Available Funding Resources
It is crucial to know the different ways you can pay for a remodeling project. Being aware of your options can save you time and money. If you know how much is available, you can decide which option fits your funds, budget and time constraints best.
According to Realtor.com, there are several different ways you can pay for a renovation. Some financing options include:
- Saving Money
- Use a Credit Card
- Take Out a Home Equity Loan
- Applying for a Loan
Using Your Own Finances
If you have the resources to finance your project, you can start your renovation faster without taking on debt or interest. Paying with cash you've saved for remodeling can be a very beneficial option.
Save money for new lighting or upgrading your master bathroom by setting up a plan to ensure you consistently stow money away. Cut out various extra expenses, like purchasing an expensive drink from the local coffee shop every day, and put that money toward your renovation savings account.
Paying in solely cash may be a bit idealistic for some projects. For example, a kitchen renovation can be $50,000 and in some cases even more. Using your credit card to finance some of the remodeling can be beneficial. Ensure that your interest rate is low or you have a 0% balance-transfer option. Paying with your own plastic means you can bi-pass being approved for a loan and you can get started on your renovation quicker.
Use Your Home Equity
Home equity is the amount of money you have put into paying for your home. It measures how much of your home you own. You can use this to finance a more expensive home renovation project. Lower interest rates are typically affixed to a home equity loan and in some instances you can deduct this when you file your taxes.
This might be a good option if you are living in your home for a longer period of time because you can pay back the loan between five and 30 years.
Reach out to a Licensed Mortgage Lender, like New American Funding
Your home is your biggest investment. At New American Funding, our mission is to provide homeowners a variety of home financing options at competitive rates; fulfilling their needs in a manner that enhances their standard of living. An experienced mortgage professional can walk you through your options and figure out what will work best for you.
Renovations require a great deal of planning and financing. Doing research and knowing what to expect can help the process move along more smoothly.