Tips for How to Finance Your Home Remodeling Project
Understanding mortgages and equity loans can be difficult. But Parade of Homes has the resources available that will answer all of your house remodel financing questions.
- Understanding Home Mortgages and Equity Lines of Credit from the Federal Reserve Board: View Now
- Resources from the Federal Trade Commission: View Now
- Resources from the US Department of Housing and Urban Development: View Now
How to Finance Your Remodeling Project
Find a Lender – Just as we recommend when buying a new home, those thinking of remodeling should talk to a lender first. You’ll be able to get a clear understanding of the loan options available, and even more importantly, know how much you can afford. Because every home and every remodeling project is unique, professional remodelers will need to know your budget before they can even begin to advise you on how to accomplish your remodeling dreams.
Start Early" Deposit Money in “Remodeling Account” in Advance – A disciplined savings approach ahead of time can lower the overall financing cost later on. Whether setting aside your tax refund or simply allocating a portion of each pay check to a special “Remodeling Project” savings account, when you know you want to remodel down the road (maybe that huge owners' suite once the kids leave the nest), there's no time like the present to begin saving for it.
Home Equity Line of Credit (HELOC) – A Home Equity Line of Credit allows you to borrow funds against the equity in your home. A HELOC allows you to draw funds as you need them, up to your credit limit. Typically an adjustable interest rate, and many plans have a fixed time period. Interest paid may be tax deductible and should always consult with a tax advisor. You can find more information on HELOCs from the Federal Reserve.
Home Equity Loan (HEQ) – Like a HELOC, a Home Equity Loan is based on your home's equity. You will receive the entire loan amount at closing, and HEQs are generally a fixed-interest loan with terms up to 15 years. Again, interest paid may be tax deductible and should always consult with a tax advisor. You can find out more about HEQs at Bankrate.com
Refinancing Your Existing Mortgage– For many, refinancing is still a great option, and with today's historically low interest rates, it's an even better way to finance a remodeling project. And for those who haven't built up a lot of equity yet, many lenders offer future value loan programs which set a loan amount based upon the future value of the home after remodeling.
Determine how much mortgage makes sense for you at either of these links: