Deciding to renovate part or all of your home can be fun and exciting, but it also requires careful planning. One of the first things you’ll need to take into consideration is how much your project will cost since different projects can vary widely. Bathrooms for instance, typically cost around $20,000, while something like a basement remodel could be even more. Once you figure out the cost, you’ll need to determine the best way to pay for the project.

While you can choose to pay with cash or savings, that might not be feasible. You also may not want to invest all of the money that you’ve saved into a project as it’s important to keep some reserves for unexpected events. Luckily, there are plenty of ways for you to finance your home renovation project and ease the strain on your pocket.

Personal Loan 

Personal loans are paid through a bank, credit union or other financial lending company. There are several credible online lenders along with traditional banks and credit unions. With a personal loan, the money is paid as a lump sum and you usually have an agreed length of time to pay it back. Interest rates vary based on your credit score, how much you have borrowed and the lenders. Personal loans are a good option for new homeowners who don’t have enough equity built up to quality for a home equity loan or HELOC, or for those who don’t want to refinance. These also work well for small projects or people with strong credit. They are also less risky than loans that use your home as collateral. Keep in mind that if you don’t have a great credit score, or if you miss a payment, your interest rate could go up and make it harder to pay back the loan. 

Home Equity Loan 

Home equity loans are like a second mortgage and are a common way for homeowners to finance home renovation projects. Equity is the amount of your home that you own and can borrow against. So if your home is valued at $250,000, but your mortgage balance is $100,000, that gives you $150,000 of equity you can borrow. Home equity loans are easier to qualify for if you have poor credit because it uses your home as collateral. It also can give you access to a large lump sum of money at low-interest rates. That also means that if you don’t pay the loan back, you risk home foreclosure.

Home Equity Line of Credit

Instead of getting a lump sum (like with a home equity loan or a personal loan), a home equity line of credit, or HELOC, gives you a maximum amount you can borrow — just like a line of credit. You can borrow against the line of credit as many times as you want (as long as you don’t exceed the limit). Typically, you can make smaller payments to start out with, but those payments may increase after time. Interest rates are usually variable, and lenders can freeze or cancel your line of credit if your home’s value suddenly drops or your financial situation changes. 

Cash-Out Refinance

A cash-out refinance is like a two-for-one mortgage refinance and loan: It replaces your existing mortgage with a new loan for more than you still owe on your house and gives you the difference in cash. But you do have to have equity built up to get the difference paid out. If you need to refinance at a lower interest rate and also need to fund home improvement projects, this could be a good option. Bonus: It’s typically tax-deductible, and you can also use the extra cash to pay off other debts, like high-interest credit cards. Like with a home equity loan or HELOC, you’re using your home as collateral, so you risk foreclosure if you can’t make payments.

Home Mortgage Refinance Option

A mortgage refinance replaces an existing loan with a new mortgage. This can reduce your loan interest rate and lower monthly payments, while also giving you access to your home’s equity. A home mortgage refinance takes a lot of paperwork and could restart your loan’s amortization process, so be sure to do your research before getting started. As with some other types of home finance options, you will have to pay fees, taxes and closing costs on a refinance mortgage. 

Second Mortgage Refinancing

Just like a home mortgage refinance, you can consider refinancing your second mortgage. This could lower your interest rate, or let you consolidate both mortgages into one. Refinancing the second mortgage may be harder than the first one, because it’s a higher-risk loan. Like a primary mortgage refinance, a second mortgage refinance takes a lot of time and paperwork. 

Credit Card

Some people opt for credit cards to pay for home improvement projects. This can make sense if you don’t have enough equity built up for a home loan or want to avoid a personal loan but do your research. Some credit cards may offer 0 percent APR for the first 15 to 20 months, so you can pay the loan back more quickly. Some cards also have rewards programs or give you cashback, which can help you recoup some of the cost. Be sure to read the fine print, and stay current on your payments, or interest rates can quickly jump into the double digits. 

Our Financing Options

At Kehoe Kustom, we are excited to announce our new financing options for your Hudson Valley home remodeling project. We offer affordable monthly payments that will allow you to start your project now and pay it off as you’re enjoying your new kitchen, bathroom, or other space. If you’re interested in financing your project, fill out this prequalification form — it’s super easy, takes less than a minute, and will not impact your credit.

Deciding on which kind of financing you should use for your home remodeling project can be daunting. So take your time and do your research so you can find the best option for you and your family. Thankfully, there are many options available that will allow you to transform your home and ease the burden on your wallet!