Different Ways That You Can Pay For Home Improvements
If you own a home in need of some improvements, or if you are thinking about purchasing a fixer-upper, you may be wondering where you can find the finances to help you meet your goal. Fortunately, there are several options available to help you pay for your project; unfortunately, many homeowners aren’t aware of the choices available to them. If you would like to know the different ways that you can find the cash to revive your property, here are some things to consider;
Although, not the most original idea, this option is the most foolproof. If you can afford to save up your own money, you can avoid the other pitfalls from financing your improvements, such as credit being denied or interest being charged. Although the most frugal option, saving the old fashioned way isn’t feasible for everyone. If you struggle to put aside money, consider utilizing a service such as Tip Yourself, a useful app that lets you put money aside whenever you think you can afford to.
Credit cards can be a great option if the renovations required are not extensive. Although interest rates on credit cards tend to be a lot higher than personal loans and refinance options, there are 0% interest offers to take advantage of if you know that you will be able to pay the balance off within the offer period.
Another way to pay for your home improvements is to take a visit to the bank and inquire about a personal loan. Personal loans, also known as ‘unsecured loans,’ are loans that require no collateral upfront. One of the most significant advantages of a personal loan is that the setup costs are low and they typically involve little paperwork. On the other hand, interest rates for personal loans tend to be much higher than a loan secured against your home.
Taking out a second mortgage is less expensive than taking out most other forms of credit and there are also tax benefits that homeowners can take advantage of. Refinancing is one of the best options for anyone who owns a property that requires extensive remodeling. If you have a healthy amount of equity in your home, it may be a good idea to consider a cash-out refinancing option. A cash-out mortgage allows you to free up to 80-90% of the market value of your home, but you may also be required to pay closing costs.
Home Equity Line Of Credit
A Home Equity Line Of Credit, or HELOC, as they’re more commonly known, is another option which allows homeowners to borrow against the market value of their home. HELOC’S differ from a refinance in several ways. The main difference is that a HELOC does not pay off the original mortgage, but instead provides a line of credit based on your home’s value, minus the amount of your outstanding mortgage. HELOC’s allow homeowners to draw on the value of their house as, and when, they need it. One of the most significant benefits of a HELOC, in comparison to a traditional refinance, is that you can save on typical closing costs such as origination and title fees.
FHA 203(k) Mortgages
FHA 203(k) loans allow the homeowner to refinance the original loan while simultaneously rolling the renovation costs into a new mortgage. There are no stipulations as to whether a licensed contractor or the homeowner has to complete the renovations, which can be useful for DIY’ers. Another benefit of the FHA insured loan is that it takes into account the value of the home AFTER the proposed improvements as a means to calculate the loan amount.