Home renovation can have several advantages and is usually done to improve energy saving and safety, expand living space, increase the value of the property or simply give it a makeover. However, home renovation is not exactly cheap, and if you are considering it, you will also have to look at various financing options.
It is recommended that you start with consulting your financial advisor or lender in order to get a professional assessment regarding your requirements and the related expenses you will incur. These experts can also advise you about borrowing money for your renovation.
Consider your options
Your own resources:
If you are planning a small-scale renovation, you may use your own funds for acquiring materials and work on the project yourself.
For small-scale renovation projects, you can purchase the materials with credit. However, make sure you don’t go overboard with it, since credit card interests rates can add up to huge bills.
Personal loans are better when it comes to small-scale renovation. Interest rates on personal loans are not too high and you can arrange to pay back the loan over a period of 1-5 years, with regular principal and interest payments.
Personal line of credit:
A line of credit can facilitate long-term renovation plans. You only have to pay interest on the funds you use, and as you continue to make payments, more funds become available. Furthermore, a line of credit can remain open over long periods of time and you can borrow money without having to reapply again.
Secure lines of credit and home equity loans:
Secure lines of credit work much like personal lines but are opened against your property’s equity. They are generally very economical and have lower interest rates, but legal fees are incurred when setting one up.
Mortgage interest rates are very low when compared to those of credit cards and personal loans and mortgage refinancing is recommended when you plan large-scale renovation of your property. Refinancing your mortgage helps you in the long-run since you can make payments over extended periods of time on low interest rates. However, legal and appraisal fees apply to this case.
Financing improvements upon-purchase:
If you are about to purchase a home and decide on large-scale renovation after inspecting it, it is advisable that you finance the renovation by adjusting the mortgage before you purchase the property. This will work the same way as mortgage refinancing, but you will be saving on additional legal and appraisal fees.