Home renovations of all sizes have one big thing in common, money! Whether you’re looking to do a complete kitchen remodel, update a bathroom, or simply install new hardwood flooring, you’ll need to come up with a practical budget and figure out the best way to finance the work.
When it comes to financing your home renovation, there isn’t one solution that fits all situations. Here are some of the different solutions for projects of different sizes.
Home improvement projects coming it at less than $5,000 can often be funded by cash, credit cards, or a personal line of credit. Oftentimes, homeowners use a combination of these payment methods. These are usually smaller projects like having your house painted, installing flooring in a room or leveling your patio.
For larger home renovation projects, most homeowners will need to look to financing options above and beyond personal savings and credit cards. Projects like kitchen remodels, finishing the basement or converting to open concept can require homeowners to seek alternative financing options. Here are some of the most common options:
Home Equity Line of Credit: A Home Equity Line of Credit (HELOC) allows homeowners to tap into up to 80% of the equity in their home.
Mortgage Refinancing: This form of financing allows you to renegotiate the terms of your mortgage and secure a loan in the same way you did with your primary mortgage. This is usually the best option only when you have a lot of equity built up in your home.
Second Mortgage: This option allows homeowners to borrow against the equity or their home and use their house as collateral.