Your home should feel like a place that inspires you every day. Renovations may bring new energy into your space, make it more comfortable and even increase its value.
Maybe you’re ready to brighten up the kitchen, refresh a tired bathroom or redo your floor and you’re wondering how to pay for it. The price of a renovation could run between $15 and $150 per square foot. How much you pay depends on things like the size of the project, where you live and the cost of labor.
The good news is that you don’t necessarily have to pay for everything upfront. There are several financing options that could help you turn your renovation ideas into reality. Let’s look at ways you could pay for a much-needed home renovation and how to decide which one works best for you.
Home improvement loans
Home improvement loans are a type of personal loan offered by banks, credit unions and online lenders. With a home improvement loan, you typically get a lump sum of money that you repay in fixed monthly payments over a set period of time.
There are two main types of personal loans: secured and unsecured. A secured loan is backed by something valuable you own, called collateral. Collateral could be your car, house or another valuable asset. If you don’t repay the loan, the lender could take the collateral to recoup their losses. Because collateral makes a loan less risky for the lender, secured loans often have lower interest rates.
An unsecured personal loan doesn’t require collateral. Instead, the lender looks at your credit score, income and overall financial history to decide if you qualify. Because unsecured loans don’t require collateral, lenders take on more risk, often leading to higher borrowing costs. But you don’t risk losing your collateral if you default.
A home improvement loan may be a good choice if you need all your funds upfront and prefer to avoid the paperwork and longer wait that sometimes comes with other financing options.
Home equity loans
A home equity loan lets you borrow money by using the value of your home. The key term here is equity. Equity is the difference between what your home’s market value and how much you still owe on your mortgage. For example, if your house is worth $250,000 and you still owe $150,000, you have $100,000 in equity.
When you take out a home equity loan, you borrow against your equity. The lender gives you a lump sum of money and you agree to pay it back in fixed monthly payments over a set number of years.
Since the house is collateral backing the loan, interest rates are often lower than those of unsecured loans or credit cards. The risk is that if you fall behind on payments, the lender could take your home, so it’s important to borrow only as much as you can afford.
Credit cards
Credit cards may seem like the simplest option for funding a renovation. You can swipe, pay for supplies and start your project right away. For small updates, like painting or buying new light fixtures, credit cards could be convenient and appropriate.
Some cards even offer rewards or cash back, letting you earn perks while you spend. If you qualify for a card with a 0% introductory APR on new purchases, you could have months of interest-free borrowing as long as you pay the credit card off before the promotional period ends.
The downside is that regular credit card interest rates can be very high. If you carry a balance for too long, the cost of your project can easily balloon. Credit cards usually work best for small, quick renovations you can pay off quickly.
Choose the financial tool that suits your needs
Every home tells a story, and sometimes that story needs a fresh chapter. Renovations may take time, effort and money, but they could also bring comfort and joy into your daily life.
The best way to fund your renovation depends on your financial situation, credit score and project size. Before making your choice, compare rates, repayment terms and risks. The right financing could make your renovation easier and give you peace of mind as you improve your space. When you choose the financing option that fits you best, you’re not just fixing up a space but investing in a better, brighter future for yourself and those around you.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of mozconcepts.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.
