Financing Options to Consider Before Starting Your Home Renovation Project

Financing Options to Consider Before Starting Your Home Renovation Project

If you do not have a sufficient amount of funds on hand in order to finish your home renovation project, then financing is the best course of action to take. Most home improvement projects will end up costing you more than you initially thought.

You can also remortgage your home if you want to obtain the capital that you need in order to upgrade your property. There are a plethora of different financing options to choose from, so selecting the best one for you is of the utmost importance.

Things You Should Do Before Starting a Renovation

You should first set up a budget that is flexible. Once you begin tearing your house apart you may notice several additional costs. Expect the unexpected and create a flexible budget to prepare for possible issues down the road.

You also need to have a clear idea of the final result. You can use online or magazine images to ensure that you and your contractor see eye-to-eye on the project. Visual references are a must if you want to avoid pitfalls in the future.

In addition, creating a five-year plan will allow you to see the bigger picture. The last thing you want is a duplication of your efforts in the future, and having a list will allow you to work, budget and plan accordingly.

Identifying an ideal storage solution will also help before you start working on your project. You can use your garage, shed, attic, basement, self-storage facility or a rented storage bin in order to store certain items.

It is also imperative that you create a schedule that is realistic before you begin any actual work, and you should ask friends and family if they can recommend an all-star contractor team in order to tackle your home renovation project.

Financing Options for Home Renovations

You can dig into your savings in order to fund smaller home renovation projects. You can also opt to use your credit card in order to pay for some of the materials, such as paint, wallpaper, plaster, etc.

Another option is to go with a personal loan instead. Personal loans tend to carry lower interest rates when compared to credit cards. Payments are made regularly over a predetermined period, which usually ranges from one to five years.

If you are planning on funding large renovations then mortgage refinancing may help you complete your more ambitious projects. You will have to incur certain set-up costs when you refinance your mortgage. 

However, the interest rate may be lower than a credit card or a personal loan. A personal line of credit is a good choice for projects that may take years to complete. You can access the funds on a need-to-use basis, which works well for ongoing home renovations.

In some cases, a person may buy a starter home, with plans to make significant renovations to it upon purchase. If you are such a person then you may want to consider adding the extra amount to your mortgage. 

The interest that you will be charged will be lower than the amount needed for a credit card or a loan. A home equity loan and a secured line of credit are additional options that you may want to consider.

They come with preferred interest rates and provide the same benefits as conventional loans and regular lines of credit as well. However, because they are secured by the equity that you have generated in your home, you may be subject to certain legal fees.

What is the most reliable and easiest method to finance a renovation?

If you are planning on major renovations then mortgage refinancing may be the smartest path to take. The repayment terms tend to be manageable and fair for most homeowners. 

You will usually have a long period of time with which to work, so you can continue to work on projects for a prolonged period of time while saving money down the line. 

It is also worth noting that when you refinance your mortgage you will be replacing your existing mortgage with a new one. The terms of your new mortgage will not be the same as your previous mortgage, and the amount of interest that you pay will tend to be lower.

Mortgage refinancing options are myriad, so please speak to a mortgage broker in order to find an option that works for you.

Taking the First Step

A mortgage broker will take care of the paperwork and will find a solution that caters to your unique financial needs. They will go over all of the different packages and deals at their disposal in order to provide you with a personalized plan.They can also get you better rates than the ones that are offered by most banks and other financial institutions.