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Whether you want to renovate your home to keep it fresh for a new season or prepare to sell it, a home renovation project can be a significant undertaking. Financing the home renovation project is one of the biggest questions you should ask yourself before you begin the project. You need to think ahead of your home renovation project and find a reliable way to finance it.
Thankfully, there are several options you can pick from depending on your goals and financial ability. You can talk to your real estate agent and find the best project options. Here are some of the best options to consider when financing your home renovation project.
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Saving is arguably the safest financial option when undertaking any project. You can save up a chunk of money for your home renovation project. You will have to wait longer before initiating the renovation project if you don’t have a large sum of money in your savings account.
While this might derail your plans, it is advantageous because you don’t have to worry about paying back a large credit card bill or loan once the project is complete. You can talk to your real estate agent and determine the amount you need to save.
In most cases, the cost of a home renovation project depends on the changes you intend to make. If you want to finance the entire renovation project by saving, it will be best to start by executing more minor renovations first.
This ensures that you don’t end up spending more than your budget. It also helps you manage your finances and project.
Also known as home improvement loans, home repair loans are unsecured personal loans offered by credit unions and banks. You can also get them from several online lenders. However, given that these loans are not secured, you don’t need to use the house as collateral.
This is advantageous because you don’t put your house on the line. Your loan and interest rate qualification mainly depend on your credit score. Therefore, you will likely get the loan if you have a higher credit score.
Funding from these loans is remitted to your account once you agree to the terms and conditions. It can even take only a day to receive the funding. Home repair or remodel loans have fewer fees, shorter repayment timelines, and lower loan limits than HELOCs or home equity loans.
In most cases, home improvement loans only go up to a few months or years maximum. You will also notice that home improvement loans have a significantly lower loan limit. This is the case because most renovations don’t cost much money.
Most home improvement loans are in the range of $100,000, while home equity loans can go up to $800,000.
You are encouraged to go for home improvement loans if you plan to undertake small or mid-sized projects in your home. For instance, this is the right financing option if you want to do a window replacement or a bathroom makeover.
You can also finance your home renovation project using HELOC. Since HELOC is a secured loan, you can qualify for lower interest rates that make it affordable. This isn’t the case with most unsecured personal loans.
Besides, HELOCs are revolving credit, meaning you can take what you need when you need it. If possible, you can increase or decrease your borrowing limit. Given their significant flexibility, HELOCs are ideal for those undertaking bigger and longer home renovation projects.
However, because the home is put up as collateral, you could lose it if you don’t make payments on time. It is also crucial to know that most HELOCs have variable interest rates. As a result, your loan repayment could increase depending on the market conditions.
Before you take a HELOC, you should talk to your real estate agent and ensure you understand all the terms and conditions.
Instead of going for a HELOC, you can consider getting a home equity loan. Home equity loans are paid out in a lump sum repayable over several years in monthly payments. The monthly payment is fixed, and one must not default on them.
Also known as a second mortgage, home equity loans have become popular in recent years. They have a much more extended repayment period than home improvement loans. They also have higher borrowing limits.
If you are undertaking a comprehensive home renovation project, you can consider getting this type of loan. Keep in mind that home equity loans are secured. This means you have to put up your home as collateral.
However, they are slightly better because you don’t have to worry about market fluctuations, as is the case with HELOCs.
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Getting the right financing option for your home renovation project is vital. It would help if you went for a financing option that fits your budget and will get the job done on time.
Author bio– Joshua Shull is a builder and a broker in Arizona. He can help you build, remodel, buy, or sell any property.
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