Going through a remodel is a stressful enough time for homeowners. This is especially true if you are getting multiple rooms or parts of the home renovated at the same time. Having so many workers going through your property on a daily basis can become exhausting. Most homeowners put up with it because they know the end result is something spectacular that they will enjoy for years to come. Another aspect of the remodel that homeowners must figure out is how they are going to finance the entire operation. It is why we have taken a look at the best financing options for your home remodel below.
1. Cash – the best financing options for your home remodel
The most efficient, and the best, way to pay for home remodeling projects is with the cash. If you have enough savings that would allow you to pay for a remodel, you are good to go! However, you should still have enough money left over for emergency situations. Talk with your contractor about the amount of money you are willing to spend. They can inform you about the remodeling work they can fit in with such a budget. If the work you want to get done is exceeding the budget, you can always put off some of the remodeling work until next year.
If you do not have enough money in your savings to get your home remodeled, or you do not want to drain your savings account, you have the option of seeking a home improvement loan. These loans are given out by the United States FHA. They allow you to borrow up to $25,000 at very competitive interest rates for the purposes of home repairs and remodels. The Title I loan is very useful for home remodeling. In addition, there is also the 203(k) program loan. These loans give you a set amount of money for you to acquire and rehabilitate an older properties.
3. Home Equity
If you do not want to go the Title I loan route, you may also be interested in taking out a loan with your home as the collateral. Why would you use your home as collateral on a loan? Because it is going to give you a much better interest rate as opposed to a loan that does not involve any collateral. While the financing options for your home remodel are extensive, we believe a home equity loan is a great option. As long as you take out a reasonable amount of money that you can afford to pay back in the coming years, you will be fine.
In some ways, the second mortgage option is the riskiest of the financing options for your home remodel. However, a second mortgage it is a valid choice nonetheless. With a second mortgage, you are getting a fixed-term loan with a set interest rate. This will tack on to your existing mortgage. If you have already paid your first mortgage, you can take out another one to complete the remodeling work. This scenario is usually a lot safer for homeowners than having two mortgages at the same time.