You have lived in your house for years, and the worn kitchen counters, rickety doors, and sagging front porch are starting to get to you. A home remodel is the obvious answer to this problem, but that can get pricey. Even a simple window replacement can cost between $400 and $800, and securing a permit for your contractor can cost between $200 and $500.
While these costs can seem overwhelming, you do have options to finance your remodel without damaging your financial health. Here are some of the more common methods that homeowners can use to fund their projects.
- Your Savings. This is the ideal solution for homeowners looking to fund a remodel. If you happen to have the cash in your savings account, then it might be time to spend it. Investing in your home can not only improve your quality of life, but also the value of your home.
- Home-Equity Loans. These loans take about 15 to 30 years to pay off, according to This Old House. They generally have fixed interest rates, but the rates can be higher than traditional mortgages.
- Home-Equity Lines Of Credit. This can be a wise option for long term projects. Home-equity lines of credit work like a credit card, in that the lender will give you a cap and you pay off the money in about 10 years. Interest rates do vary by lender, so it’s important to find a reputable company.
- Construction Loans. These loans are generally short term and are intended to convert into a mortgage loan after the renovation. They can be useful for specific large projects, but lenders can be picky about who they actually accept. They are also often released once the work is underway, which can be risky.
- Mortgage Refinancing. Especially if you were considering this option anyway, now may be the best time to refinance. But if you are looking to lower your interest rate, make sure you are not spreading the loan too thin and paying more in the long run.
So, how do you know which method is best for you? With so many options out there, how can you decide which is best for you? To start, consider the following factors:
- Think about how long the remodel will actually take. You don’t want to take out a loan that lasts longer than the actual renovation.
- Be realistic about how much you can actually borrow. Is your credit score high enough to take out a large load? Also consider interest rates, as your financial situation will need to support those.
- Decide whether this will be a long-term remodel. This will determine how much you spend on materials. For example, copper gutters may be more pricey, but they can last 50 years, while galvanized steel lasts about 20.
If you still aren’t sure which factors to consider, and which financing option is best for you, consider working with a financial professional. They will take an unbiased look at your bank account, credit score, and remodeling plans to advise you on your decisions. And once you decide, happy remodeling.
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We’re renovating a house in a nearby village and so far are using our current income and some of our savings. We’d like to keep away from debt as much as possible, so taking on a loan is out of the question. It’s gonna take 3-4 years to be all finished, but we’re not in a rush anyway.
Good for you, Ramona. Patience has its own rewards.
The way to go, Ramona. Debt to satisfy instant gratification is way over rated.
We managed to build 3 complete homes for rental use about 15 years ago, doing the same. Built a small one first, used the rent from that one to help build the next, and the third. Each took me a year or more, doing 90% of the work. Sold them all after about 5-7 years of rental (the point at which they start to need major items replaced), and walked away with nearly 1/2 million in cash.
I have been slow ‘modeling since I bought my house back in 2001. Did the hidden work of bringing my electrical up to date first. One floor at a time. Then got all the stuff that I think of as protective – roof and siding etc. Took out a loan to replace all windows. Then we added a freestanding propane stove in the LR and a 100 gal tank so I have no year round minimum monthly gas bill. We just pay 1 time a year to refill the tank. And have heat if power goes out. Opened up the kitchen into the LR and finally replaced 50 year old lino. We still have wirk to do.
Good for you, Debbie! You clearly have thought all of this out and as a result you are reaping the well-deserved benefits.
Maybe right now isn’t the best time to do a major remodel with the price of lumber tripled and all supplies in short supply or on back order. I went to Ace hardware over the weekend to get 7 bolts, washers and nuts to repair a pool ladder to sell on Facebook marketplace. Planned to charge $20. for the ladder. THE 7 BOLTS WITH WASHERS AND NUTS WERE OVER $3. EACH and they would have cost more than $21. plus tax to get these tiny fasteners! Went to “Plan B” and hunted through boxes of hardware from long ago yard sales and found free stuff which would do the job. Sold ladder this morning, 100% profit as it came off the curb on trash day. In some parts of the country a $3.35 2″x4″ x 8′ long (price a year and a half ago) stud is pushing $10.!!!!!!! now. This is due to supply chain disruption and the huge number of people escaping the cities, moving to houses and having them remodeled. In a year and a half or two years the prices will come down as the supply chain gets back to functioning well.
The storage is fantastic! My bathroom layout is completely different but I wish I could rearrange it to make more storage space.