Home Improvement Financing Quick Guide
It is everyone’s dream to one day own a home, and for many that dream will eventually one day materialize and come true. Owning a home does require work though, and at some point every home owner wants to undergo a renovation to fix a problem or employ the services of home renovation contractors like Heilman Renovations to turn their home into something even more spectacular.
For some though, the thought of a home renovation is frightening. In today’s economic uncertainty, being able to obtain financing for a home is hard let alone even considering obtaining financing for a home remodel. It is possible though and certainly a dream current home owner should not pass on.
There are many financial options out there for individuals who want to build that extra addition or remodel the kitchen or bathroom, and many of these options don’t require selling one’s soul to accomplish it.
Home Equity Loans for Home Improvements
One of the most popular ways to finance home improvements is through a home equity loan. With a home equity loan, individuals take out a loan based on the equity or value of the home. A home equality line of credit is the most flexible loan out there. With this particular loan, homeowners can get a loan for say $10,000 even though their anticipated project is only estimated at $5,000. Due to the equity in the home being larger than the needed value, homeowners have the option and flexibility to put more towards the project. When it comes to home repairs or additions, one can never know for certain the actual amount of a project. For this particular reason, a home equality line of credit is commonly the best option when it comes to home repairs.
Credit Cards for Home Improvement
Another option available to some is to just put the repairs or additions on credit. Compared to home equality loans or even just personal loans, putting home renovations on a credit card is going to cost a lot more in interest, possibly making the total project cost sometimes double or more, particularly if the debt is not repaid quickly.
Home equity loans are not always an option for some, which is why using credit is sometimes the only option available. One advantage to using a credit card for home repairs is not having to come up with an actual project plan, an estimate or an appraisal. If the credit card debt is to be repaid quickly, it can be the best choice due to its simplicity.
Retirement Plan Loans
For those who may not have the credit to obtain a credit card with a large enough spending limit to accomplish that much needed addition or repair, sometimes borrowing from a retirement plan is a feasible option. The interest rates on retirement plans are usually considerably lower than putting it on credit cards or taking out a personal loan. There are fees associated however, and sometimes these fees can exceed 10% of the total amount withdrawn, so it is always a good idea to double check the terms and conditions of early withdrawal. There are also some hidden rules associated with these types of loans as well, that many are unaware of. Depending on the retirement plan, some may require you to pay the money back within a set time period. The payback time is usually five years for traditional retirement plans. If one were to leave their employment within those five years, any remaining amount owed is usually due immediately.
Home renovations are something every home owner dreams of. They can be expensive, sometimes exceeding nearly 25% of the home’s actual purchasing price. They do however add value to a home. There are several options out there for those who wish to make their home renovation dreams a reality. From personal loans, to home equality credit, to borrowing against retirement plans, the options are endless and worth it to turn an everyday house into that dream home.