Remodeling your home involves significant costs. Often, you may need to borrow money to execute the much-needed changes in your home. Luckily, you have a handful of options that you can consider for your next home project. Below are some of those options.
1. Credit cards
You have got to love home improvement credit cards for their ease of use and convenience. Regardless of your financial situation, you can find a suitable credit card. Depending on the kind of credit card you take, the benefits you enjoy range from welcome bonuses, travel and shopping using cashback rewards, and 0% interest as an introductory APA offer. If you pay your credit card loan before the credit period expires, you could be financing your home improvement for free.
The downside of credit cards is that if you do not pay your loan before the introductory period offer expires, you could end up paying very high interest. The amount of interest also varies with market changes.
2. Taking a government loan
A government loan can save you the money you would otherwise pay on interest and insurance. You can borrow the FHA Title loan even without home equity. If you just purchased your home and you see the need for some upgrades, a Federal Housing Association title loan is your best bet. The types of home upgrades that qualify for this kind of loan are only those that improve the livability of the home.
You can also take the VA cash-out to refinance loan which guarantees 100% of your home value.
3. Refinance your mortgage
You can replace your current mortgage with a new one for better interest rates. If the new loan is bigger, you get to pocket the difference and use the extra money to make home improvements. Choose to refinance when there is a drop in market interest rates so that you can take advantage of lower interest. If you remain with cash after doing your home renovation, you can use it to repay other debts or put it into your savings or emergency fund.
Refinancing your mortgage also comes with its cons, including paying costs related to closing, such as origination fees, taxes, and appraisal fees. You also get to pay your loan for a longer-term.
4. Home equity loan
A home equity loan, also known as a second mortgage, is where you use the equity of your home as collateral. The amount of loan you get will depend on the value of your property. You can use the loan to finance major home repairs.
To qualify for a home equity loan, you will need an excellent credit rating and the loan-to-value ratio. With a home equity loan, you enjoy fixed interest rates, and you do not have to worry about market fluctuations. You, therefore, ay equal monthly installments during the life of your loan. You should, however, be careful to make timely payments on your loan so that you do not risk losing your home. Be prepared to pay higher interest rates than other forms of financing.
5. Home equity Line of Credit (HELOC)
With HELOC, you will have a stream of money to use when you need it, until your approved limit. This credit method is similar to a credit card but with a draw period end date. The draw period can last up to 10 years, after which any many that you have not paid becomes a fixed home loan. Your home acts as the collateral, so you can enjoy lower interest rates. If you have lengthy or ongoing home renovations, taking HELOC would be a good idea because you can take the money you need whenever you need it.
For HELOC, however, you need to have enough home equity, which is a higher appraised value than what you owe on the home. Another con is that HELOC interest rates vary with market conditions.
6. Personal loan
A personal loan is an unsecured loan where your interest rate will depend on your credit score. There are a variety of lenders for this kind of loan, including credit unions, banks, and online lenders. You can, therefore, choose the lender with the best rate. However, be prepared to part with higher rates of interest and more fees.
Before you choose a financing method, ensure you can make timely payments to avoid the costs that come with a default.
Article Submitted By Community Writer