5 home remodeling payment options
If you’re planning on renovating or remodeling your home, the one thing you’ll need is – money. No matter how many ways you can find to cut back on costs, remodeling isn’t cheap. Before rushing into any financial decision, research all the options available and find what payment option is best for you.
Aside from cashing in a 401k, or borrowing from a much-needed retirement plan, some of these other home remodeling payment options are available:
Home Improvement Loan - There are two loans administered through the FHA. If you’re looking for a loan to fix up your existing home, you will want to look into what is called a Title I loan. A Title I loan allows you to borrow up to $ 25,000 for home improvements for a single-family home, and it is a fixed rate loan. (The other loan is a 203(k), but it is only used if you are purchasing a home that you plan on fixing up entirely)
Second Mortgage - If you have lived in your home long enough to accumulate equity, a second mortgage may be your best remodeling financing option. This is a fixed rate, fixed term loan that is based on the equity you have in your house.
Home Equity Line of Credit - If you feel comfortable putting your home up for collateral, then a home equity line of credit may be the best way option for you. This type of loan allows you to essentially use your home as a form of revolving credit. Your credit line is typically set at 75% - 80% of the appraised value of your home less the balance of your first mortgage.
Cash Out Refinancing – If you financed your home years ago, and locked in at a high interest rate, you may want to check into refinancing your home at a lower interest rate and adding additional cash out. This is a great option when remodeling because you can lower your monthly mortgage payment by refinancing, and get enough cash to complete your home improvement project.
Credit Cards – Credit cards can be used to finance a home renovation or remodel project, but it is a method that should be used only if you know you can afford to pay more than the minimum payment due. If you use a credit card, be sure to select one with a reward system. This way you’ll earn gift cards, frequent flyer miles, or some other type of reward to benefit from.
Before making any big decisions, take some time to consider if your home improvement project is really necessary. For example, your kitchen may simply need updated instead of replaced. That ripped or torn carpet may be hiding beautiful hardwood flooring underneath. After consideration, you may find that the remodeling project you thought you couldn’t live without, may simply not be needed at all.