The average cost for remodeling a home is between $19,800 and $73,200, based on the project’s extent, quality of materials, and size of the property, according to price estimates on HomeGuide. Whether you’re planning to renovate your kitchen, pool, or entire home, you should carefully weigh how you’ll finance the project. There are plenty of payment and financing options available. The one you settle for will depend on how long the project will last, how much you need for the renovations, and the amount of cash you have at hand. Also, given budgeting is one of the essential steps for successful home remodeling projects, ensure you have a budget for your project in place. Below are financing options you should consider for home renovations.
Obtaining a personal loan is probably the best way to fund your remodeling project, especially if you’re looking for a low-risk option. Since most personal loans are unsecured, you don’t have to worry about home foreclosure if you fail to repay your loan. Moreover, banks and credit unions offer personal loans of up to $100,000 with reasonable interest rates. If you have a good credit history, you can rest assured of receiving low-interest rates. While online lenders offer personal loans, beware of the high interest they often charge.
Another excellent option for financing your home renovations is cash-out refinance. However, it is crucial to understand how cash-out refinance works before making any move. Note that this funding method entails taking a new mortgage for your home to repay the old one. Refinancing also allows you to cash out a portion of your home’s equity. The amount you take will depend a lot on the equity you have. Refinancing is ideal for large projects like kitchen remodeling and home pool construction. Although you’ll incur set-up expenses, cash-out refinance guarantees better interest rates than a personal loan and credit card. You can opt to refinance for a pool upgrade, kitchen renovation, and extension development. This option is also perfect if you’re looking for a long-term repayment option.
Home Equity Loan
If you can’t take out a personal loan or don’t qualify for cash-out refinance, home equity loans might be your best option. Unlike personal loans, a home equity loan requires you to use your property as collateral. When you take out a home equity loan, you borrow funds worth your home’s value but less the amount of your current mortgage. Home equity loans are perfect if you’re financing a one-time remodeling project because the borrowed amount and interest rates are fixed. However, you risk foreclosure if you don’t repay the loan. With this in mind, understanding home equity loans should be a top priority before applying for one.
There are many things to consider when remodeling a home. And the most critical factor is how you’ll finance the project. While you can save money to fund your project, it might take months or even years, depending on the scope. Fortunately, there are other ways you can get funds for home renovations. You can choose to take a personal loan, refinance your mortgage, apply for home equity loans, or borrow from your 401(K).