7 Ways To Finance Home Improvement Jobs

Home improvements have a reputation as time consuming, costly undertakings that are more hassle than happiness. However, with the plethora of financing options available today, these projects don’t have to be panic-inducing endeavors. Based on the timeframe for the project and repayments, and your unique credit situation, you have options for all types of projects. Below are just seven possible ways to finance home improvement projects. Look at the options and weigh the pros and cons against your project size and budget and get building today!

Low Interest Credit Cards

Depending on your credit and the size of your project, you may be able to open a line of credit with a low- or no-interest rate attached. If your credit score is above average, you are likely to find offers for small- to mid-sized maximums. Keep in mind that to protect your credit, it’s ideal to use around 30 percent of the available credit on a credit card. This option may not be the wisest decision if the project exceeds your credit option’s comfort zone (again, keep in mind the 30 percent usage rule of thumb). It is also less ideal than other options if your credit is not healthy, as the interest rates you may rack up could extend beyond the project’s true cost.

HELs

Home Equity Loans are basically a second mortgage. While these loans are pricey and often come with a package of fees and closing costs (just like primary mortgages), you receive the money all at once and will typically have a fixed interest rate.

HELOC Loans

Unlike personal or unsecured loans, Home Equity Lines of Credit loans typically have lower interest rates and are revolving open credit lines. Keep in mind, however, that the benefit of HELOC loans is a double-edged sword, as the loans are secured with your home – in other words, your home becomes in jeopardy if you were to default on the loan. These loans are ideal for larger projects or ongoing repairs, as the credit line functions more similarly to a credit card (where you can borrow money periodically) than a HEL.

Cash-Out First Mortgage Refinancing

This option of financing home improvements involves replacing your current mortgage with a brand new one, and through the refinancing, having access to some cash. Cash-out refinancing typically comes with a long payout plan and thus a longer period to pay the money back. Keep in mind that by refinancing with a cash-out option will increase your APR, potentially raise your closing costs and your mortgage amount will increase. Another added bonus to this scenario is if you can refinance for a lower mortgage rate than the one you currently have for your home.

Online Unsecured Loans

Fund your project through non-traditional means, like online lending. Online loans boast lower rates than are typically seen from banks for personal, unsecured loans. The benefit is the transparent, all-online application process. Unlike HELOC loans, these loans have no security tied to your house so their risk level is less worrisome.

Cash Payments

Pay in cash and receive financial help the “old fashioned” way: If you can afford to pay in cash without any sweat, that’s preferable to accumulating debt. However, if you are interested in simultaneously building your credit and are in a financial situation where this is a feasible option, you may want to consider a small loan, which you pay off immediately with assets you already have access to. Depending on how long you have been preparing for this project and the expansiveness of the improvements, saving up ahead of time may be a savvy alternative to dipping into savings or opening a line of credit. It is important to assess your financial situation in its entirety: your credit, your income, your expenditure, your short- and long-term budgeting and what your future financial outlook may be down the road. If you are anticipating significant life events that may drain your savings beyond what you are used to, tackling a large home improvement project without the cash may be unwise.

The Bottom Line

Whatever your goals are, there are options to help you make your home improvement dreams come true without endangering your financial health. If you need help deciding on what option or options will meet your needs, talk with a financial planner or personal assistant.