4 Considerations on How to Pay for a Home Renovation

4 Considerations on How to Pay for a Home Renovation

Whether your kitchen hasn’t been updated since the 1980s, you really need an extra room for your growing family, or you can’t stand looking at your bathroom tiles one more morning, your desire for a renovation might not match your budget. However, there are loans you can take out as well as creative ways you can get or save money to avoid going into debt.

Starting Out

Going into debt may be necessary if you need a significant amount of money or if the renovations need to be done soon, but there are other ways to boost your income or cut back on your spending that don’t involve having to borrow. For example, if you have student loans, shop around with private lenders and see if you can get a better rate or a longer payment term if you refinance. This can leave you with more money each month to put toward your renovation. You could get a second job, even a temporary one, or look into doing some gig economy work. The latter could be anything from driving to yard work to freelance writing or teaching and more.

Refinance Your Home

A cash-out refinance allows you to take out a new loan, paying off the existing balance and leaving you a little extra leftover cash. This can be a good way to get money quickly even though it does involve taking on more debt. You could also refinance your home with lower interest rate and continue to put away the difference in savings each month. Whatever approach you choose, be aware that the costs of refinancing could make this a less attractive option than it seems, depending on how long you plan on being in the home. There are refinance calculators and other tools online that can help you estimate your savings.

Borrow from Your 401(k)

As is the case with a cash-out refinance, this can be a fairly easy way to get some cash. This might also be a good option if you are struggling to qualify for other types of loans. There are some significant advantages and disadvantages to this approach, and you should make sure you fully understand them before proceeding. On the plus side, you are essentially borrowing from yourself, so the repayment, including interest, goes back into your savings. This interest also tends to be low. There are several other potential disadvantages, but perhaps the biggest one is that if you lose or leave your job, your time to pay off the loan shortens significantly or you’ll be left with potential tax implications and penalties.

Do It Yourself

Doing it yourself will cost you more in time and can cost you more in money if you make mistakes that you have to hire professionals to fix. However, it is also a time-tested way to renovate your home for less, and if you genuinely enjoy it, it may be worth it. For some tasks, you might even consider getting friends and family together for a kind of old-fashioned barn raising, only instead of raising a barn you are painting a room or tearing down wallpaper. Promise food, drink and that you’ll return the favor and you could start a new tradition in addition to saving money.