Outdated kitchen. Overrun backyard. Unusable basement space. Are you daydreaming of home renovations? Before you begin breaking down walls, let’s look at a variety of financing options. Here are the most common methods to make your home renovation goals a reality.
Cash
Paying in cash is the most straightforward financing option for any home renovation. Create a budget for your project, and save until you have enough money to cover all expenses. In addition, you’ll want to save a little extra for any unexpected overhead. Budgeting with cash can help to eliminate frivolous spending. However, it can also extend your timeline depending on how much you are working to save and how fast you are able to get there.
Mortgage Refinance
Have you been making payments on your home for a few years? Is your interest rate higher than current market rates? If so, you may be eligible for a mortgage refinance. Mortgage refinancing will reduce your monthly mortgage payments. As a result, you can fund renovations with whatever money you save through your lower monthly bill. Bonus: the value of your home may increase through renovations! Always consider the resale value.
Cash-Out Refinance
Similarly, you can tap into your home equity and borrow up to 80 percent of your home’s total value. You might use this method to pay off your current mortgage and take out additional cash to cover renovations. When thinking about cash-out refinancing, it’s important to consider the additional interest and fees. This option works only when the renovations are improvements that will increase the overall value of your home.
Home Equity
Getting a home equity line of credit allows you to borrow money against the value of your home. You receive usually up to 80 percent of your home’s value, minus the amount of your loan. Often, this method has lower interests rate than other common loans. In some circumstances, the interest may even be tax-deductible.
Retirement Funds
Lastly, homeowners can consider pulling money from a 401K or IRA account. This method might bring with it additional penalties or tax payments. Thoughtfully consider all financing options before making a decision.
Ready for renovations, but not sure where to begin? Crane Realty has your back! Check out more home renovation insights below:
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