Financing Your Remodeling Project

Even before you know what the project is going to cost, you must consider your financial situation. Everyone’s circumstances are different. How will you be financing your remodeling project?

Here is a list of options to get you started.

  • Refinancing with cash out option is great if your existing rate is a little high. You may be able to refinance taking cash out against the equity and still keep your payments close to where they are now as rates have remained at forty year lows for some time now.

  • Home equity loans are another source if you have enough equity in your home and already have a low interest rate on your current mortgage. Most home equity loans offer the same tax deduction benefits as a standard mortgage.

  • Home equity lines of credit. Unlike the loans where you get all the funds upfront, lines of credit are used on a need to have basis. The interest is not deductible but you also don’t pay on money you don’t use.

  • Savings can also be a good source, but consider the consequences of wiping out your life savings.

  • Unsecured Loans can work if the amount to be borrowed is a relatively small amount. These loans are usually only $15,000 – $20,000 unless you have a long standing relationship with the banking institution, have a stable source of income and have an impeccable credit rating.

  • Secured Loans are another source for financing. The downside being obvious that you will have to use collateral to secure the loan however secured loans generally are easier to get and usually come with a lower interest rate than an unsecured loan.

  • Borrowing against your annuity or 401k plan can be a good alternative. Since it is your money, you have no credit check. The downside is that usually you have to pay them back within a five year period or have to pay the early withdrawal penalties.

  • Whole life insurance policies generally let you borrow up to 96% of the policy’s value. This is a relatively inexpensive route as you only have to pay the annual interest. Another upside is that there are no credit checks with this type of borrowing either.

  • Borrow from a relative. Although most people shy away from this, if there is a relative that has considerable funds, this may be a good option.

  • Home improvement loans. These will generally require inspections of work from the lending institution prior to any loan distributions being made. They are also made on irregular intervals based on percentage of work completed. Two special types of these loans are Title I and 203(k) and are offered through the FHA.
This list is by no means a complete list, but it will give you an array of programs to look into. You should always talk to a financial advisor if you are not familiar with the different types of financing.






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