Financing home remodeling projects may take years of saving, or it might require a loan application, but knowing which route to take usually requires taking a look at the overall cost of the project and the financial options available.
Home renovation loans are extremely popular, but there are multiple options for securing funding through a bank. Saving money for a few years to pay for the project outright might also look like an attractive option, but it's not always cut-and-dried as far as which option will provide the best results.
Saving Money Versus Getting a Loan
There are multiple options for financing home remodeling projects, but not all financing options offer the same benefits for every family. One of the most important things to consider regarding the choice between financing and a cash payment is the fact that it might take several years to save up enough money for a major remodeling project.
A question a homeowner might want to ask him or herself is whether waiting several years for a new bathroom, a redone kitchen, or a home addition is worth waiting for the ten years it might take to save the money for the project. A home renovation loan might cost more because of the interest paid on the loan, but the family will get to enjoy their remodeled home much sooner with a loan.
For some families, a home loan that allows work to begin immediately on a home remodeling project is the best route forward. For other families, where time isn't of the essence, or for very patient homeowners, saving money over time to pay for the project in cash might feel like a more rewarding experience. Every family is different and must evaluate their circumstances individually.
Multiple Financing Options are Available
Two of the primary ways modern homeowners finance their home remodeling projects is through home equity lines of credit and home equity loans. A line of credit treats the equity the homeowner has in the home as a credit card, and a home equity loan is a second loan a homeowner might seek that also uses the equity he or she has in the property.
Nerd Wallet summarizes a home equity loan well:
"Instead of getting a line of credit, as you would with a HELOC, you'd receive a lump sum of money. A home equity loan could make sense if you don't want to refinance your first mortgage — if it has a very low interest rate, for example. But the interest rate would probably be higher with a second mortgage like a home equity loan than with a cash-out refinance."
It's worth speaking with a financial professional about the costs of each option and which type of loan might be better for the particular project a homeowner has in mind.
Tip: Your contractor or home remodeler might have options for financing, so you should ask whether their rates are better than what you might find directly through a bank.
Using a Credit Card for Financing Home Remodeling
It's actually not out of the realm of possibility that a homeowner might use a credit card to pay for a home remodeling project. A home remodeling project that may be paid off in equal installments over the course of 12, 18, or 24 months is a great opportunity for a new credit card that offers zero-interest charges for a long introductory period.
A credit card can also make sense if the project is small enough that you'll be able to pay it off in a few months and reap the rewards of extra airline miles, cashback, or some other type of credit card benefit.
Plan Your Green Home Remodeling Now with Gettum Associates, Inc.
We're a full-service home remodeling company that can help you with every facet of your green remodeling project, from design and planning to execution and completion. Let us bring our expertise in design and remodeling to help you create a dramatic and beautiful exterior for your home.
Call us at 1-317-542-3853 for more information on our services, as well as to discuss your home remodeling project and how we can help. Plus, if you're ready to get started on a renovation project, you'll want to download our guide: Seven Questions to Ask When Choosing a Remodeler in the Indianapolis Area.