We all look around our homes and see things we would like to change or upgrade, but how do we pay for it? For some, coming up with the cash is not an issue. However, for many homeowners, the kind of money it takes to do a major reno isn’t just sitting around. So what’s an eager renovator to do? There are a few options to help you make your dreams of renovating a reality.
Refinance your mortgage. This is the best option for homeowners who would benefit from refinancing anyway, perhaps with a lower interest rate, as long as they don’t spread the cost of the improvements over more years than the renovation will last.
Home equity line of credit. If you already have a good first mortgage, a home equity line of credit can be a good option. With these loans, you draw out money as you need it and pay it back at your own speed, as long as you make at least minimum monthly payments.
Home equity loan. With a home equity loan, you borrow a fixed amount and pay a fixed payment over a certain amount of time. A 15-year term is typical, but with some lenders, you can go as short as five years and as long as 30 years.
Construction loan. A construction loan is used to build a house or make major renovations. It might be worth considering if, for example, you are building a major addition that will cost more than the equity you have in your home.
FHA Title 1 loan. These loans of up to $25,000 for home improvements are insured by the federal government and are available from approved lenders at market interest rates.
As you can see there are several options to fund your home renovations. Make sure you speak to several lenders to make sure you find the situation that best fits your financial needs.