You will need funding if you’re getting a set of new windows or a home addition. If you don’t have cash ready, don’t worry; there are other ways to fund your remodeling project. This post shares the best financing options for your home improvement project that do not involve cash-in-hand.
Using your credit card is ideal for financing projects under $15,000, as it’s easy to pay within one or two years and good for taking advantage of zero-interest payment plans. Also, it doesn’t require placing your home on collateral, which makes it a less risky option.
Personal or Unsecured Loan
Personal or unsecured loans are best for projects that cost between $15,000 to $50,000. “Unsecured” loans are named as such because they don’t require collateral. The application process is straightforward, not as difficult to qualify, and has longer payback periods. However, it is worth noting that personal or unsecured loans tend to have the highest interest rates. This means you may break even if planning a high-ROI home improvement, such as replacing windows.
A secured loan means your home will be placed as collateral. This option typically has a higher payout than the previous two types, ideal for large home improvements such as roof replacement.
There are three types of secured loans:
Cash-Out Refinance — This type of secured loan requires recomputing your existing mortgage and taking out funds you can use for your home improvement project. You should note that this option puts your mortgage back to square one, which is not ideal if you have already paid several years’ worth.
Home Equity Loans (HEL) — Home equity loans are like taking out a second mortgage on your home. Depending on the lender, you might be required to pay back the principal within the first 15 years.
Home Equity Line of Credit (HELOC) — HELOC is similar to HEL, except that you have a revolving open credit instead of getting all the money at once. This is ideal if you are looking into doing several minor projects over the years instead of spending it all on one major remodeling project.
Legitimate home improvement contractors offer financing options through tried-and-true financing partners. This is an ideal option for financing projects on short notice or if you need funding tailored to fit the project’s cost.