How To Pay For Your NJ Home Renovation
Ready to start your project?
Perhaps you are getting ready to sell your existing home or just looking to make a change, a home renovation project can be a major undertaking. One of the most common concerns is always how to pay for the renovation.
Having a solid plan to finance your NJ home renovation is essential. There are several ways to finance a home renovation based on your current financial situation and overall goals. As with any big undertaking, be sure to weigh all options.
The best way to finance a home renovation is to save enough money to pay for it outright. However, that may not always be possible, especially in emergencies or for larger renovations. In these cases, financing may be necessary. The route you choose will depend on your monthly budget, the size of the project, and your return on investment.
With all that in mind, the remodeling experts at Interior Excellence have come up with seven ways to pay for your New Jersey home remodeling or renovation project.
The 7 Best Ways to Pay for Your Home Improvement Project
When looking for ways to finance a home renovation, consider the following options:
1. Save Your Money
The best way to finance a home renovation project is to save the money first. Of course, saving up money to cover the cost of a home renovation means that you will wait longer to start the project. However, it also means that you will avoid having to pay off loan balances and credit card bills, along with their interest rates, later down the road.
2. Take Out a Home Repair or Home Remodel Loan
An unsecured home improvement loan from a bank, credit union, or an online lender allows you to borrow without using your home as collateral. The loan’s interest rate and qualifications will be based on your personal credit history. With unsecured loans, you can receive the money quickly, allowing you to start your project right away.
These loans usually have short repayment schedules, offer lower amounts, and have fewer fees when compared to a traditional home equity loan or home equity line of credit (HELOC). On the other hand, they will have a higher interest rate, especially if your credit is not great. These loans typically work best for financing small to mid-sized projects, such as bathroom renovations or window replacements.
3. Apply for a HELOC
A HELOC is a type of secured loan that uses your home as collateral, allowing you to qualify for a lower interest rate. It also features revolving credit, so you only take money (up to your approved borrowing limit) when you need it. A HELOC typically has a variable interest rate as well, so your payment may increase based on current market conditions. The downside is that if you don’t make your loan repayments on time, you risk foreclosure. Remember, a HELOC requires home equity, so make sure that your home has 15 to 20 percent equity before considering a HELOC.
4. Apply for a Home Equity Loan
An alternative to a HELOC would be a traditional home equity loan or second mortgage. A home equity loan is paid through a lump sum of money that is repaid over time through fixed monthly payments. When you obtain a home equity loan, you can lock into a fixed interest rate and pay the same amount each month over the course of the loan.
5. Apply for a Cash-Out Refinance
With a cash-out refinance, you replace your existing mortgage loan with a larger loan and new interest rate. You also get to keep the difference between the old and the new mortgage, using that cash for home improvements.
There are significant drawbacks to refinancing, so proceed with caution. Factor in all possible closing costs such as origination fees, an appraisal, and taxes. Also, unless you are refinancing over a shorter term, it will take longer for you to pay it off fully. Refinancing is usually the best option only in cases where you secure an interest rate that is lower.
6. Pay Using a Credit Card
Using a credit card might be a good financing option for small renovations, like upgrading a fireplace or installing new cabinets.
Some credit cards offer interest-free options for an initial period, which means that you can pay for a minor home improvement project, over time, without paying any interest. Some cards come with awesome rewards packages that allow you to earn perks based on the money you spend on your renovation project.
Of course, there are risks that are associated with using a credit card to pay for a renovation. If you don’t pay the balance prior to the expiration of the introductory interest rate, you might face exceptionally high rates compared to other financing options.
7. Apply for a Government Loan
A government loan can save you money on insurance and interest for qualified homeowners.
The HUD Title I Property Improvement Loan, for example, allows you to borrow as much as $25,000 without any home equity. This home repair loan is great for upgrading livability in a recently purchased home, but certain cosmetic upgrades will not qualify.
Financing Your New Jersey Home Remodeling Project
There is a lot to consider when weighing your finance options for a home remodel or refinish. However, the bottom line is that an expert remodeling job will ultimately enhance the value of your New Jersey home and enhance your quality of life. The New Jersey home remodeling experts at Interior Excellence can do just that.
At Interior Excellence, we get the job done right and have served countless satisfied customers throughout New Jersey with quality home improvement jobs for over thirty years.