How to finance a home improvement project
If you’re planning to remodel your home this year, you’re not alone. Thanks to a recovering economy, home values and equity are on the rise and many homeowners are finally beginning those home improvement projects that they’ve been putting off since the recession hit nearly ten years ago. According to the Joint Center of Housing Studies at Harvard, the home improvement industry will see record-setting spending in 2015.
Though the economy is improving and money isn’t as tight as it used to be for most people, a home remodel can still be pretty expensive and can put a major strain on people’s finances. Here are some tips for affording the remodel you’ve been dreaming of.
Ask the right questions
Before you even begin a home remodel you need to ask yourself some important questions. Most important is how long you plan to remain in your current home. If the answer is a short amount of time, then you’re going to focus on smaller scale remodeling projects that will add to your home’s value without breaking the bank. What is the scope of your remodeling plans? Is it relatively small or quite extensive? Will you hire a contractor to do the work, or will you do it yourself? Once you’ve answered these questions, you can begin to estimate costs and plan a budget.
Thinking about financing
Once you’ve set a realistic budget, you can begin to think about how you want to pay for it. There are several options open to you. If your remodeling plans are relatively small-scale, and especially if you’re planning on doing the bulk of the work yourself, you may be able to use your savings to fund the project. You have immediate access to funds and you don’t have to worry about repaying it. Of course, not everyone has enough in savings to fund a home remodel, especially if it’s a larger project that will require hired contractors. There are a few options homeowners have to finance a remodeling project.
One option is a home equity line of credit (HELOC). The nice thing about a HELOC is that it provides you with ongoing access to funds. Because remodeling projects tend to go over budget, a HELOC is usually a good option.
If you’re uneasy about borrowing against the equity in your home, credit cards are another viable option. Just keep in mind that they tend to have higher interest rates. Also, maxing them out or carrying a balance month-to-month can hurt your credit score. If you plan on paying with credit cards, make sure to pay them off quickly.
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