As a homeowner, you probably have a wishlist of changes that you want done to update your home. Maybe you want to reorganize the kitchen to make room for new appliances or redesign the living room to make it more modern and tech savvy.
What stands between most home improvement and remodeling plans is money. The cost of making changes to your home can quickly escalate leaving you in financial turmoil. Luckily, there are financial institutions that offer home improvement loans, so you do not have to spend your savings on the project.
Even though applying for a home improvement loan is convenient, you need to be careful. Make sure you keep up with your payments, or you can sink into debt just like self-funding the project, if not worse.
Since you have yourself budgeted, it’s time to find your perfect home improvement loan. Here is a brief overview of five funding options to help you prepare for your next home improvement project.
Home Equity Line of Credit
A home equity line of credit is a good option if you already have a good first mortgage. With this kind of financing, you are allowed to draw your money based on your needs or expected expenditure and repay it at your convenience. The catch is that you have to deposit the minimum monthly payments. One of the benefits of this financing option is that you do not have to pay any interest until you use the money loaned to you by the financial institution.
According to financial experts, equity line of credit is sometimes renewable, but you risk losing your home if you do not abide by the agreed payment plan. It is also important to note that interest rates can be adjusted based on the economy and the various factors that affect the finance and real estate industries.
Home Equity Loan
A home equity loan allows homeowners to borrow a specific amount of money to support a renovation project and make fixed monthly repayments over a given period. Most financial institutions allow clients to repay the loan in 15 years, but nowadays, some lenders allow a repayment period as little as five years or as long as 30. This financing option is usually more cost-effective than a construction loan, and it’s an ideal choice if you do not want to deal with adjustable interest rates.
Refinancing your Mortgage
This is a perfect option for people who would benefit from refinancing to get a lower interest rate. However, it is imperative that you don’t end up repaying the loan for more years than the actual renovations will last. Don’t lock itself into a long contract you don’t plan to pay off early. Remember, your upgrade won’t be upgrades for long. 5 years is a lot of time to have a machine running, and their age will start to show.
Reverse Mortgage
Homeowners who are more than 62 years old qualify for a reverse mortgage based on the percentage of equity that they have in their home. One of the advantages of a reverse mortgage is that you do not have to pay the financial institution until you relocate or your home is sold. However, this kind of loan is usually more expensive than home equity loans. Make sure that you get advice from a home improvement loans advisor to avoid making the wrong decision and ending up in a financial limbo.
Contractor Financing
Some home renovation companies have an agreement with finance companies that allows them to source funding for projects. That is, once you contact the renovation company and agree to the terms and conditions of the project, the company officials will approach the financial institution. This saves you the time and money you would have spent applying for the loan yourself.
Conclusion
There are different ways of funding a renovation project these days. However, it is imperative to make sure that you understand all facts related to the home improvement loans to avoid any challenges down the road. Make sure that you have a plan to repay the loan from the word go.
Find financial experts that can help you understand the pros and cons associated with various funding options available in the market, so you can make the right decision. They can walk you through your costs, help you make a payment plan, and arm you with everything you need to get approved for a loan.
Article Submitted By Community Writer
