Jumping into home improvement projects can be very exciting. You get to increase the comfort of your home while at the same time making it more marketable. Some projects even lead to massive savings in the long run, who would not want to be part of such? Then why is it that not all homeowners have joined in the bandwagon to do their own home improvement? I think we all know the answer to that; finances.
Home improvement projects can be quite costly, running up to tens of thousands of dollars depending on the type of project undertaken. Most homeowners cannot afford that, and thus feel like home improvement is not for them. Well the good news is that there are options available for financing your home improvement project but you ought to know some essential things first.
Paying in cash is best
If you are lucky enough to have some savings stashed away somewhere, then that is your best bet for financing your project. Cash is simple to use and is a once-and-for-all deal. If you use cash, you do not need to worry about paying back the principal amount, leave alone the ever-increasing interest rates.
You can also put the fear of having your home repossessed firmly behind you. It may pinch when you see your savings reduce right before you, but if you made wise choices in your home improvement project, you ought to be able to regain that amount and more in the due course of time.
Next best option…
Your next best option if you just do not have that amount of money would be to get a personal loan. Get it from a family member or a very close friend and you will find that it is a flexible option. These will allow you to pay back slowly, without any exorbitant interest rates or the threat of foreclosure of your home.
Of course, this is a delicate balance because most of the time where friendship is mixed with money there are disastrous consequences, but if you have good family members/friends and you stick to your end of the bargain, it should work out alright.
There are many loans offered for the homeowner who wants to carry out improvement projects, but perhaps the best is a home equity loan. This allows you to borrow against your house’s equity, that is, the amount remaining when you deduct the remaining mortgage from the house value. The amount of money you borrow is fixed, great for financing a once-in-a-lifetime project. The interest rate is also fixed, so you can rest easy even when interest rates are skyrocketing. Your home will be repossessed if you cannot pay back though.
Another option is the home equity line of credit. This is quite like the home equity loan in that you borrow against the value of your home equity, but in this case, the money you get is not one fixed amount. You are allowed to make several withdrawals until you hit a particular set limit. This makes it a great option for those projects that take quite some time and require regular payments to be made. Beware though, just like the home equity loan, you risk foreclosure if you are in default of payments. The interest that is paid on this loan and the home equity loan is tax deductible.
The government might also offer financing for improvements on property, but such loans are usually of a fixed amount and do not cover luxury improvement projects such as adding a whirlpool to your bathroom. There are some governments, which also finance their citizens in their quest to create more energy-friendly homes. Make sure to do your research to find out whether this option is available to you.
Last word of advice
Unless you are completely sure, do not take a loan from your contractor. They are known to charge notoriously high interest rates. You might not see it at first glance but too many homeowners have had to keep up with some hidden costs that they had not seen. Be careful as you undertake your home improvement, the last thing you want is to lose your home. Contact your solicitor wherever you are not sure.
The guest author, Stuart Stem, is an expert home improvement blogger and interior designer. He is part of a company that provides information on energy efficient pv solar panels.