Home & Design

How to Finance Your Next Home Improvement

How to Finance Your Next Home Improvement

High housing prices and a shortage of homes to buy factor into how many homeowners decide to renovate rather than sell and move. Giving the interior a new lease on life, building an extension, or remodeling the kitchen can make your home feel like a whole new one. It doesn’t matter which renovations you need, or want to make, locating the money for projects like this is critical. Here’s a quick look at a few ways to find the financing you need.

Home Improvement Loans

There are many different types of home improvement loans you might choose from, but most fall into one of two categories – secured and unsecured loans. Unsecured loans are a popular choice because they aren’t connected to any sort of collateral, which means that the lenders won’t have the ability to touch any of your assets in the event that you default on the loan.

Secured loans, on the other hand, are connected to some sort of collateral, typically a vehicle or even your home. While these might be a good choice to fund home improvements because of their flexibility and lower interest rates, they do put your assets at somewhat of a risk. If you aren’t able to repay the loan, the lender can become the owner of whatever you used as collateral.

Cash

Maybe the simplest way to pay for your renovations is cash. Investing your matured savings bonds or savings into your projects might be more sensible than a new car or a vacation. Depending on the type of improvements you’re making, they might raise your property value by as much as 10%. If you pay for these home improvements with cash, you won’t have to make payments to a lender. That said, you shouldn’t utilize ALL of what you’ve saved for home improvement projects.

To keep from draining all of your accounts, set a budget for whatever projects you’re taking on. Either wait to do the work until you’ve saved up enough money or use what savings you have before taking out a loan to cover the rest.

Credit Cards

If your improvements won’t be overly expensive, you might be able to fund them using one of your credit cards. Some credit cards will even offer 0% interest if you pay them off within a certain number of months. It doesn’t matter which type of card you get; you have to be sure that you make the payments on time. If you don’t, you could be charged late fees and wreck your credit. Check with your bank to see which is cheaper, the interest rate for a loan or the interest rates on your credit cards. This can help you determine which option will work best for you.

Conclusion

There are quite a few diverse ways to raise the money you’ll need to complete any renovations or home improvements you might want to make. Each one of them comes with its own set of pros and cons. If you carefully look at your particular financial circumstances and try not to get into debt that you won’t be able to afford to pay back, you’ll be able to discern the best way to fund the projects you’ve been dreaming about or that are necessary. Along with getting a home improvement loan, paying for them with cash, or using your credit cards, you might also remortgage your home or even fund your projects by getting a reverse mortgage (provided that you’re over 62 years of age). Regardless, there are many options for you to get the money you need.

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