Most homeowners are choosing to put money into their homes rather than dealing with the selling process and starting over. However, the reality for most homeowners is that paying for that upgrade is a stressful venture because we all know that dream kitchen can cost you an arm and a leg. Before you get in over your head with home renovation bills, check out these methods on how to pay for your next remodeling project.
Ideally, most would say that paying for a home improvement project in cash is best but it’s not easy for most folks. The kicker is that in order to do this you need to start saving very early on. Getting a few quotes from contractors for your project will help you determine an average cost what you need to start saving for. This may force you to revisit your monthly budget and figure out where you can cut back in order to get that dream yard you have been wanting for your family.
Perk: You don’t go into debt.
Finance Through Contractor
As you know getting multiple quotes from multiple contractors for your home improvement project is a wise practice for many reasons. During this time you can discuss possible financing options they offer, if any. In most cases, contractors use third party lenders and institutions to set up their financing. This could be a great option for someone in good credit standing and has a great relationship with their contractor.
Perk: Everything is one place for your project.
There are two popular loan options for homeowners, a short-term loan and home equity loan. A short-term loan is when a bank or credit union offers you a personal loan based on your credit, loan term and amount you want to borrow. Assuming these all line up, you can have a lower interest rate than a credit card. A home equity loan offers low interest rates and the ability to write off the interest payments on your federal income taxes. However you need to make sure you have great equity and credit score for this one to work. You also run the risk of losing your home to foreclosure if you can’t make those payments.
Perk: Lower interest rates
Placing a large amount on a credit card is always a risk, however, if you choose the right credit card and are excellent at making payments, this would be a rewarding option for you. There are many credit cards on the market and finding one for you project can be a bit of a chore. You want one with a low interest rate and be sure to read over its terms and conditions before using. An added bonus, use a credit card that has rewards or point options. A new kitchen could also get you plane tickets to Paris. Do your homework!
Perk: Get rewards!
It’s easy to know exactly what you want done to your home but it’s not easy when you start to talk about the financial aspect. Whatever path you choose, be sure to do your homework and weigh the best options for your budget, credit score and financial responsibility. It doesn’t hurt to talk to your financial advisor and ask friends and neighbors to share their home renovation journeys with you. Good luck!