Are you fed up of your same old home? It’s time to renovate your old home into a new and modern look. Homeowners mostly try to renovate home instead of moving to a new home. There are many reasons to renovate home.
It can enhance the quality of life, resale value of your home and improvement of rental value for your home. Once you have decided to renovate your home the next step is to set the budget based on your finance for the whole process. If needed, you can contact your financial advisor or loan officer. Here we will tell you about a number of options you can use to finance your home renovation. You can choose any one of these options which best suits in your case and save maximum money.
- Use cash if you have
The very first option usually used for your home renovation is the cash. Most of the time for big renovation projects, it is impossible to save a considerable amount of money even for over the years. For instance, a kitchen renovation on average can cost up to $54,900 and the remodeling of a bathroom costing $16,128, which may take decades for a one to save such a considerable amount of money. Handy cash can be an excellent option for small projects as it is possible to save money for small projects over time.
It is also possible to use cash with other financing option to decrease the rate of interest you pay for the loan. If you’re thinking to borrow money for your home renovation make sure to choose a reliable and legit lender at Loan Advisor.
- Personal loan
A personal loan is another option to finance your home renovation. Unlike some other loan forms, personal loans are unsecured. There is less risk associated with the personal loan as it doesn’t require any collateral. Another benefit of personal loan is that you can get personal loans at low interest if you have good credits.
You can apply for a personal loan from the bank. You can also apply for a personal loan to any online loan company. You can borrow up to $35,000 for home renovation. Online loan platforms are becoming popular because they offer fixed rates and fixed terms. There is a benefit that you can pay the loan in full at any time. If you choose an online loan company for a personal loan, you can save your time, and it will take just a few minutes to approve and a few days to get your credit.
- Home equity loan
The home equity loan is the money borrowed by using the house’s equity as collateral. In most of the cases, you can get 85% of your home equity as a loan. The home’s equity is the difference between the whole value of the home and what you still have to owe on the mortgage. Let’s take an example to clarify more.
If your home is worth $250,000 and you have paid $50,000 as a mortgage. Your home’s equity would be only 50,000, and you owe to pay $200,000 on the home. If your equity is $50,000 you can borrow its 85%, i.e. $42,500 loan for renovation of your home. If the value of your home increases, the home’s equity and then the loan on that equity increase. A home equity loan is a good option as compared to refinance if a big amount is available to you as home equity.
- A home equity line of credit
A home equity line of credit (HELOC) is similar to the home equity loan but differs in one way. In case of a home equity loan, you will get the whole loan as a lump sum one time, and you have to make payments each month until the loan is paid off. HELOC is not one time, its revolving. It means that you can use the money and pay it off and then use it again for a specific time.
HELOC has a variable rate of interest, but home equity loan has fixed interest. It works just like a credit card you can utilize the funds for extensive repairs. There can be risk associated with home equity loan as your home is security. If you are unable to pay your loan for some reason, you can lose your home.
- Cash out refinance
In cash-out refinances you are going to replace your existing mortgage to the second mortgage and at the same time taking required cash for the home renovation. Let’s see an example if a house is worth $300,000 and the mortgage is $150,000. It means that the owner has 50 % equity and home renovation will cost $50,000.
In cash-out refinance, the original mortgage is replaced with a new mortgage of $200,000, giving the owner $50,000 in cash for home renovation. You will be benefited because of low mortgage rates, and you can fund large projects at the same time. You will also have enough time to pay back the loan because of the long payout plans usually 30 pay years. Your monthly payments could be even lower if you got a home equity loan or line of credit.
- Credit cards
Credit cards can be used as a finance source for home renovation. The benefit of using credit cards is that is most convenient, easy and simple to use. A huge benefit you will get from a credit card is that you can cash in later. For availing funds, it is easy as pulling a card from a pocket and pay for your needs. Despite its convenience, there are some restrictions using credit cards. Many have a much higher interest rate, and there are possibilities to catch in the cycle of making minimum payments each month. Some credit cards have fixed interest rates; it means that they can change it whenever they want.
Keeping in view all the options and details related to them, you can decide and choose your finance option for home renovation while saving the money as much as possible.