How to Pay for a Home Renovation

How to Pay for a Home Renovation

Whether you're considering selling your home and you need to make the necessary changes before you put it on the market, or you want an update to your kitchen or dress up the exterior, a home renovation can be a good investment. It can also be costly, but you may need to come up with some creative ways to pay for this transformation. Be sure that when you determine how much you will need that you also build in an additional cushion of 10-15% above the estimate you have been given. It's not unusual for unexpected expenses to arise during a renovation.

How to Pay for a Home Renovation

Take Out a Personal Loan

Credit unions, banks, and online lenders are all potential sources for a personal loan that you can use for your home renovation. This type of financing can be an excellent way of paying for life's obstacles. They generally have reasonable repayment terms, and paying back successfully over time, not to mention consolidating debt by paying off existing credit cards into one payment can also increase your credit score.

Mortgage Refinance

Refinancing your mortgage is another way to secure the money you need for your renovation. By taking a cash-out refinance you can pay off your existing mortgage and have the remaining cash on hand left to use on improvements. With rates continuing to fall, a lower interest could even save on the monthly expenses. However, a refinance does come with fees, so before going through the tiresome mortgage process, make sure that the math works out in your favor to make this worthwhile.

Home Equity Line of Credit

If you’re not looking to go through the entire mortgage process you can opt to borrow from the equity that you have built up in your home by taking out a home equity loan or line of credit. While there will still be credit and income qualifications, as well as typically an appraisal, this can be a much faster approval process where you can receive your funds in as little as a couple weeks. Just keep in mind that while fixed rate options are available, there are also variable rates that can change as the market fluctuates. An attractive feature is the significantly lower fees than a typical mortgage, usually only requiring an appraisal or application fee.

Government Loans

If you don't have as much equity in your home as a HELOC would require, this government option could help. With a HUD Title 1 Property Improvement Loan, you can get up to $25,000 for certain approved upgrades. If you are a veteran, you might be able to get a cash-out refinance loan with the assistance of the Department of Veterans Affairs.

Borrow Against Your Retirement Account

Borrowing against your 401(k) or IRA can also be an option if there are issues in securing other avenues. While a loan will likely carry a low-interest rate, keep in mind this could be jeopardizing your future. If you happen to lose your job, it will be required to pay back within a certain period or time, as well as there being tax implications.

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