How to Finance Your Remodeling Project
Saving the necessary funds to kickstart a big remodel project can be daunting. But if you plan ahead, set some money aside, and understand your options, you’ll be ready to remodel when the time is right!
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 Saving Early
A disciplined savings approach ahead of time can lower the overall financing cost later on, so consider opening a “remodeling account” where you can begin depositing money in advance. Whether setting aside your tax refund or simply allocating a portion of each paycheck to a distinct savings account, you will then have access to funds once the time is right.
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. Find more information on HELOCs >>
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 fixed-interest loans with terms up to 15 years. Again, interest paid may be tax-deductible and you should always consult with a tax advisor. You can find out more about HEQs here >>
Refinance Your Existing Mortgage
For some, refinancing can be a good option, and it’s an option when financing a remodeling project. And for those who haven’t built up a lot of equity yet, many lenders offer future value loan programs that set a loan amount based on the future value of the home after remodeling.
Helpful Links
- 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
- Determine how much mortgage makes sense for you at either of these links: Wells Fargo Bank | Bankrate.com