Home improvements are one of the largest forms of investments a person will likely spend aside from a mortgage. Most homeowners will need to put in a significant amount into their homes over the years, summing up to well over 25% of the home’s value. Kitchen renovations, bathroom renovations, and replacements for flooring, roofing, and more cost thousands of dollars. Thankfully, there are several strategic ways to finance home repairs. Below are the top five.
One of the safest ways to finance home repairs is simply to save up enough capital to pay for the project upfront. Saving takes time, so it could mean that you will need to put off your home renovations until later than you’d like. It also usually involves sacrificing some luxuries or amenities to achieve your financial goals. This approach is great for those who are okay with completing home improvements at a later date.
Another option is to pay using a credit card. Using a credit card allows you to take out funds and pay them back without interest, particularly concerning smaller home improvement projects. If you are replacing kitchen counters, bathroom flooring, or updating closet shelving, paying it off through monthly installments with no interest up to a certain amount could be ideal. On the other hand, if you fail to pay on time, you could run into some hefty fees or interest rates depending on your card.
Home Equity Line of Credit
Similar to the credit card approach is a home equity line of credit. A home equity line of credit (HELOC) is a secured loan in which you set down your house as collateral in case you cannot repay the loan on time. You will be able to draw funds from this line of credit for any home improvement project you do and pay them back each time; this is called revolving credit. The prerequisite for a HELOC is 15-20% of your home equity.
Home Equity Loan
Meanwhile, a home equity loan is also a secured loan, except that it is for a one-time payment. You will also need to put your house down as collateral, meaning that if you cannot repay the loan on time, you risk your house going into foreclosure. However, you will get to enjoy a fixed interest rate that doesn’t fluctuate with the market. This option is viable for someone who knows the project cost and has good credit.
Home Improvement Loan
A home improvement loan is an unsecured loan. You do not have to have any collateral necessarily, aside from a good credit history. The benefits of a home improvement loan are that you can receive funds upfront in relatively little time and pay them back through set monthly installments. A home improvement loan is a great way to finance home repairs with less risk.
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