Remodeling a home can be an exciting activity and a way to add more value to your property, but remodeling is not a cheap venture. The cost of supplies, equipment, and hiring professional contractors can add up quickly.
Most people do not have the cash reserves to pay for most kinds of remodeling and need financial assistance. When it comes to securing finances, there are several ways homeowners can obtain funds. Personal loans, home equity loans, or home equity lines of credit are all legitimate ways to gain access to funds quickly to fund home development projects.
Let’s look at the different ways you can access credit and what requirements you need for approval by a lending institution.
Ways to Finance Home Remodeling
There are several ways you can get hold of capital to finance home improvement projects. Here are examples of the best ways to gain the funds you need:
1. Personal Loans
Personal loans enable borrowers to access credit fairly quickly from a reputable lending institution. Personal loans have the benefit of not needing to put up collateral to service the debt. The trade-off is that interest rate repayments can be high, and you will need a first-rate credit score. Repayment periods are usually shorter than other loan options at five years or less.
2. Home Equity Loans
A home equity loan, also called a second mortgage, is a loan that consists of fixed monthly payments for an agreed timeframe. Home equity loans are paid out in one lump sum. Since they are set at a fixed interest rate, borrowers don’t need to worry about market fluctuations. Your home acts as the collateral and the payments will continue after you have serviced the first mortgage.
3. Home Equity Line of Credit (HELOC)
A HELOC is a form of secured loan as the borrower’s home is put up as collateral. By having collateral, you can secure a lower interest rate as compared to a personal loan. However, HELOCs have variable interest rates, meaning that the interest rate can change depending on how interest rates fluctuate in the market. Moreover, HELOCs are a type of revolving credit, meaning that you can take what you need when needed until you reach the borrowing limit.
4. Cash-Out Refinance
A cash-out refinance loan enables a borrower to refinance a new, bigger mortgage that takes advantage of home equity. The bigger mortgage allows the borrower to take out the difference between the new (bigger) mortgage and the previous mortgage in cash.
5. Zero-interest credit card
For small renovations or repairs, a zero-interest credit card may be the quickest and easiest method. Some credit cards allow up to 18 months interest-free, which can be an inexpensive way to access funds for home remodeling.
There are several loan options available to homeowners who wish to remodel their homes. Even if you don’t have cash on-hand to fund home renovations, there may be several loan options that enable you to access capital and upgrade your home.