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Home renovations are a superb way of boosting your home’s aesthetics, functionality, and overall value. While minor renovations like installing light fixtures won’t require a lot of money to actualize, the costs can add up quickly to hefty amounts when undertaking major renovations. You should ensure you have a solid plan for how you’ll pay for your home renovation projects.
There are multiple ways to finance a home renovation project, but you first need to have an accurate estimate of the total costs of your renovation project. If you’re looking to renovate your home’s basement, you can learn more about basement renovation costs for different flooring types and finishing materials. Upon the correct estimation of the total renovation cost, you have various financing options to choose from, including:
1. Home Equity Line of Credit
When you want to purchase a home, your main financing option will be applying for a mortgage. Home remodeling is often a costly endeavor. This is especially true if you have been a homeowner for over a decade and have not conducted any significant upgrades over time. However, the advantage of owning your home for a long time is that you’ll have a significant amount of home equity.
If the interest rates remain the same, utilizing your home equity to access the Home Equity Line of Credit (HELOC) is a profound way to finance your renovations. The HELOC offers convenient funding for your renovation project at a competitively lower interest rate than that offered by personal loans or credit cards.
2. Refinance Your Mortgage
Another viable alternative to finance your expensive home renovation is refinancing your mortgage. This is simply increasing the money you borrowed to acquire your home. Typically, the new mortgage amount is captured in your current mortgage balance.
This option can prove beneficial in some ways. Firstly, if done at the time of mortgage renewal, you could be eligible to pay lower mortgage payments at a significantly reduced interest rate while accessing the money you need to conduct your home renovation. Secondly, this option is excellent if you need to borrow a definite amount. Refinancing your mortgage grants you money at a set interest rate. You don’t need to spend more than you have to, and you’re guaranteed that the payments will be affordable and consistent.
3. Personal Loan
If you don’t have enough equity to pay for your renovation projects, another great financing option is taking out a personal loan. With a good credit score, you can easily and quickly obtain a personal loan from your bank, credit union, and other lenders at lower rates. You also don’t need to provide collateral to obtain a personal loan since they’re usually unsecured loans. However, your credit rating and history will determine the amount of loan you qualify for and the interest rate.
Endnote
There are many options when it comes to financing your home renovation projects. The best financing option should be the one that best fits your unique renovation needs and budget. Start by determining how much you’ll need to pay for your home improvement project, and then look for a lender who will offer you that loan amount. Consider improving your credit score before applying for a renovation loan to increase your chances of approval.
