Often, homeowners shrug off the amount needed to improve their homes for one reason. Home improvements can add value to any house. Adding this and that significantly increases the cost of your house. You’ll reap the rewards once you decide to sell it.
But whatever your reason is for improving your home today, it can become costly. According to Forbes magazine, it can cost range from $2,000 to $20,000, which is the average. Without the necessary money to fund your project, you can’t do anything.
Consider the options you have below. Choose an option that offers a flexible loan amount, few fees, and low rates. Select the necessary means, but take note of the payment terms, approval time, application process.
A personal loan is only a great option if you need money for emergency home repairs. You can quickly obtain a personal loan; it can usually be on the same day you applied. In a nutshell, a personal loan offers a fast application process, no home collateral, and quick availability of funds. However, it often has high late fees, prepayment penalties, short loan terms, lower borrowing limits, and rates are determined based on credit score.
Home Equity Loan
Home equity is the current value of your house in the real estate property market. It is determined by calculating the difference between your house’s value and its interests’ outstanding balance. You can take a loan from this equity for your home improvement project.
It may be a good idea to take this type of loan, especially if you’ve built up your home’s equity over time. This means that you can borrow a large sum, which is great if you’re eyeing a costly project. Lenders will also give you lower rates. A home equity loan is also a secured loan, meaning your house serves as the collateral. This is why lenders allow significant loan limits and low interest rates.
In summary, a home equity loan is a secured loan that provides a large loan limit, up to 100% of your equity. It has low, fixed interest rates and loan terms of up to 30 years.
However, it acts as a second mortgage, which means you’ll pay two loans if you’re still not finished with your initial mortgage loan. Considering the large loan limit this option offers, it’s a great choice if you need to renovate your entire house. In other words, you can take a home equity loan for huge home improvement projects.
Remodeling any part of your house is also a high-demand project. Sunrooms, for example, can cost $8,000 to $80,000. If you want to add one to your home or remodel the existing one, consult remodel contractors for sunrooms to get an estimated cost.
Personal loans are often the first choice for emergency home improvement projects, but credit cards can be the simplest and quickest option to take. You don’t need to fill out a loan application form. You’ll get your card swiped, and you’re ready to get busy.
If you use your credit card, you may need to apply for a high credit limit or get two cards to fund your project. Choose a card that offers zero introductory interest rates for a specific period. Some cards allow 18 months to pass before adding interest rates. This option, however, can only work if you can pay your expenses within that preset period.
Like personal loans, using your credit card is excellent only for quick, emergency fixes at home.
Home Equity Line of Credit
You can create a line of credit for your home equity. And from this line of credit, you can take a loan to remodel any part of your house. A home equity line of credit can be most appropriate for medium-sized or ongoing home improvement projects because of its flexibility. Its loan term and rates change over time.
FHA 203(k) Rehab Loan
The 203(k) rehab loan is a government loan from the Federal Housing Administration. And since the government provides it, you get benefits from it. You can apply for it even if you’re credit score has some issues. Its down payment options are also low.
This type of loan combines the cost of your home improvement project and mortgage into one loan. You can use it to buy and improve a house. It’s best for fixer-uppers. If you have a real estate property business, this can be a good option for you.
Planning for a home improvement project is essential. Part of the process is knowing where to get your funds. Know your options to make the best decision for your home.