It’s a smart idea to get your home in top shape before listing it on the market. Small adjustments, like a paint job, are relatively easy and cheap, but also won’t drive up your property value far. If you really want to make a profit, you’ll have to have to invest some of your own cash first. But don’t automatically disqualify yourself if you don’t have a few extra thousand lying around. We’ll show you how to finance home renovations so your property can live up to its maximum potential.
Home Equity Loans
Home equity loans, otherwise known as second mortgages, have fixed rates and terms. This option works best when you know your budget and are certain you can keep up with the monthly payments. The quantity you get also depends on the amount of your mortgage and how much of that you’ve already paid off. If you’ve made a good dent in your mortgage loan already, this would be a good way to finance home renovations before you plan on selling.
Home Equity Lines of Credit
Home equity lines of credit, or HELOCs for short, is an effective low-interest way to finance home renovations. HELOCs act like a credit card, in that you are free to spend however much you need, and pay it back when you can. But beware- the low-interest rates come with the cost of putting your house up for collateral. Also, interest rates are subject to fluctuation depending on the market.
Cash-Out Mortgage Refinance
Cash-out mortgage refinances will help you finance home renovations if the interest rates on the new mortgage are lower than the original. The difference between your old and new mortgages will be paid to you in cash. But it’s no get rich fast hack- there’s a substantial amount of fees needed to secure this kind of mortgage refinance. Because it’s a complex ordeal, this option is best sorted out with a financial advisor.
Home Improvement Loans
These common loans are offered in banks and credit unions. How much you get and how high your interest will be depends upon your credit score. Home improvement loans are an ideal way to finance home renovations of a smaller scale because of their higher interest rates, shorter payback window, and lesser monetary amount.
Just as credit cards can help you pay off a car or student loans, they’re a viable route to finance home renovations as well. Of course, like home improvement loans, they heavily depend upon your credit score. Since you don’t have to pay a fixed amount each month, it’s up to you to budget your spending and make sure you have enough to pay it off. If you’re planning on selling your home soon and only need minor renovations, credit cards are a great way to go.
Qualified citizens can benefit from the federal Title I Property Improvement loan to finance home renovations. The loan will only fund necessary renovations to ensure the property is liveable, so extra additions like a swimming pool or kitchen island are out of the question. All details can be found on the website.
Before making any big decisions, make sure to research thoroughly and consult your banker in order to determine what’s the smartest option for your individual situation. Also, always remember to leave some wiggle space in your renovation budget for unforeseen expenses. While renovations are fun, they tend to present challenges that will test your patience and your wallet.