Are you ready to take the first steps towards remodeling your home? Congratulations! But before you can get to the fun of conjuring up a vision for your future home design, it’s important to decide on how you’re going to finance this project. Remodels can be a significant monetary investment. As much as we might want to skip ahead to picking out new cabinets and deciding between paint colors, it’s important to establish a solid financial foundation. This will set you up for a successful home remodel from start to finish.
Looking for tips on how to finance a home remodeling project? Lucky for you, we are experts in the matter here at H3 Construction & Design! Here are our top 5 methods you can use to pay for your project of remodeling your dream home.
Have you owned your home for a while? Has your credit score improved since the initial purchase? Chances are you might be sitting on a mound of money! Every year, your home accrues more and more equity. Equity is the amount of your loan you’ve paid off plus how much the value of your home has increased. Refinancing is a way to change the terms of your mortgage in order to save you money. If your lender determines that you’re in a better financial situation than you were when you first purchased your home, they could lower your interest rate and your monthly payments. Lower monthly payments means more money in your pocket and more money to afford a better home remodel!
Here’s a quick rundown for the step-by-step process of how to refinance your home:
Let’s say you’ve already paid off your home loan. In that case, refinancing your home isn’t an option for you. Try a home equity line of credit instead—this allows you to tap into your home equity to pay for a home renovation without refinancing anything. Pretty cool, right? It works like a credit card but is secured by your home, so your interest rate won’t be nearly as high. Your home basically serves as collateral on this new loan. There are both positives and negatives to going this route.
Another way you can leverage your equity is by securing a home equity loan. As a fixed-rate loan, this is a great alternative to the variable interest rate of the home equity line of credit. With this option, you’ll receive a lump-sum payment of cash to pay for any and all home remodeling projects. Unlike a home equity line of credit, you can’t draw out money as you need it like a credit card. The home equity loan is just that – a loan. And, of course, there are pros and cons to this option as well.
If you don’t qualify to use any of the options above, you can always lean back on using a credit card. Remember, credit cards are a little riskier than refinancing your home or taking out a bank loan. But sometimes it’s the best move if you’re deadset on making your home renovation dreams a reality. Just make sure you’re choosing the right card—one with rewards points and a low intro APR percentage. This method is ideal for small home improvements. It’s not a great idea to go into large amounts of credit card debt for major renovations unless you’ll have the cash to back it up ASAP.
Ask yourself these questions before applying for a new credit card:
Want to renovate your home without taking out any loans? Save and get creative with how you earn extra money. This option is best for those willing to play the long game. Try earning extra cash through side hustles, part-time work, and creative projects such as an Etsy shop. It might take months or even years but eventually, you can earn your way towards a debt-free home remodel project. Once you set the wheels in motion, all you have to worry about is getting your project done – no need for the added stress of variable interest rates and looming monthly payments!
Some more money management tips:
Once you work out how you’re going to finance your renovation project, the fun can begin! The next step is to nail down a contractor you can trust to bring your vision to life. Our team at H3 Construction and Design is poised and ready to help you build the home of your dreams! We take on projects of any size and have been called one of the best home remodeling companies in Northern Colorado—give us a call today at 970-515-2264 or contact us through our website!
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