Five Ways To Finance Your Home Improvement Project
Home renovation projects can be expensive, but in many cases, they don’t have to be. With the right planning and budgeting, you are able to ensure that the project is funded in the most efficient way and within your budget.
Whether you are looking to renovate only a part of the house or the entire house, understanding your budget and finding the right funding source are key to making sure your project goes smoothly.
In this article, we will discuss how to fund a home renovation project by considering various options such as a personal loan, a home equity loan, a credit card, cash and home refinancing. We will also look at the pros and cons of each funding option. With these tips in mind, you will be able to make the right decision and successfully fund your home renovation project without breaking the bank.
1. Personal loan
For many people, getting a personal loan is the best option to finance their renovation project, as these types of loans are usually flexible and quick to get, with no collateral required. However, one should be aware of the higher interest rate and the early settlement penalty that may apply.
2. Home equity loan
A home equity loan is a type of secured loan that leverages your home’s equity as collateral. However, it will only work when you have enough equity in your property and a good credit score. It is worth noting that home equity loans provide lower interest rates than personal loans since they use your home as collateral. Therefore, if you fail to comply with the lender’s terms and conditions, it could lead to the loss of your property.
3. Credit card
Similar to a personal loan, there is no need for collateral and the interest rate is higher; therefore, you must be certain that you will be able to repay it on time to avoid an interest charge. It is still a good option to fund small- to medium-scale home upgrades, especially since most credit cards allow you to accrue reward points and enjoy cashback rebates as a bonus.
4. Cash and savings
Paying in cash or with savings is an attractive option because there will be zero interest on your renovation project. However, as your home is not a liquid investment, putting your savings into your home reduces the amount of cash you have on hand.
5. Home refinancing
Refinancing your home involves taking out a new housing loan to pay off the old one, and depending on how much is still owed, it is possible to cash out a portion of the new loan to do home upgrades and renovations. However, the home refinancing process will incur some costs, such as stamp duty, early settlement penalties, and transfer fees. Before you take the plunge, sit down and calculate the cost and gain.
[Image source: Photo by Maria Ovchinnikova]
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