Home improvements can be costly. Even renovating a small bathroom can cost several thousand dollars. But making upgrades to your home not only helps you enjoy your home more, but it can increase the value of your property.
Whether you're looking to upgrade your home or preparing to sell, there are several options available to help you pay for your home improvements.
One of the easiest ways to finance a renovation is through your own savings. The cash is available immediately and you won't need to pay any interest.
However, it's easier said than done. Home renovations can easily cost tens of thousands of dollars, and not everyone necessarily has enough cash in the bank to fund a full renovation.
If you made a significant downpayment on your home or have owned your home for a while, you may be able to access a home equity line of credit. A HELOC allows you to borrow money against the equity you have on your home. (Your equity is the difference between the current market price of your home and the balance owing on your mortgage.)
How much you are allowed to borrow will depend on the amount of equity you have in the home.
Cash-out refinances are when you take out a larger mortgage on your home. Part of your new mortgage will pay off your existing loan, the remainder will be paid in cash to use for whatever you like - in this case, your home improvement project. While you're increasing how much you owe on your home, you'll be able to pay the new amount over a longer period of time.
This is a particularly good option if mortgage rates are lower than the one you currently have. Even if they aren't, mortgages are one of the lowest interest ways to borrow money - so it might still be a smart option.
Personal loans include unsecured lines of credit from financial institutions or private lenders. These are typically easier to get when compared to HELOCs and less work than refinancing. However, the interest rates can be higher - so it's important to review your loan carefully to make sure it makes sense to go this route.
Credit cards are a financing option that you likely already have. However, it's best not to overextend when it comes to credit cards. They come with hefty interest rates that can rack up really quickly. You should use them sparingly and only for minor renovations that you can pay off relatively quickly.
However, if you have the means to pay off your improvement purchase quickly, some credit cards have fantastic rewards or cashback programs that make using credit well worth it!
Depending on your renovation project there may be government-backed loans available. Many of these options have limitations on the types of upgrades that qualify, as well as restrictions based on who is eligible.
For those with lower credit scores, there is the 203(k) loan backed by the FHA. Another option for new homeowners with limited equity is the HUD Title I Property Improvement Loan.
Fortunately, there are several options available for homeowners to pay for home improvements. Depending on how long you've owned your home and your current financial picture, there may be one option that's better suited to your situation.
Take the time to review all your options and you'll be on your way to an upgraded home in no time!
We hope this article was of value to you. For more great tips, bookmark our site and for all your mortgage needs, visit the A Team at TMFFMS.
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