Planning to renovate your house? Before you begin any projects involving your house, you should take a look at your finances. Do you have enough money on hand to cover the expenses of your project? If not, how do you plan to obtain the necessary finances for your home renovation?
Before you look for financing options, you will first need to determine how much the renovation will cost. Once you know your budget, there are several different avenues you can explore:
- Credit Card – If you have a high credit limit and your budget for renovation fits within that limit, you can use your credit card to fund your renovation. You can even call your credit card representative and have your total credit balance restructured to a monthly payment.
- Personal Loan – If you only need a small amount to cover the overall expenses, you can apply for a personal loan. What is good about personal loans is that they have low interest compared to other types of loans, plus you can choose to pay your loan within one to five years.
- Equity Loan – This type of loan requires that you have equity, usually in your house, secondary properties, or car. Since you have equity to assure the loan, the interest rates are usually low.
- Mortgage Refinancing – Refinancing your mortgage is another good way to obtain financing for your renovation. Refinance your mortgage balance, but at a higher principal, so you will have extra money to cover your remodel and related unexpected costs that may arise.
- Loans from Relatives or Friends – If you do not feel knowledgeable or comfortable enough to take out a loan for your home renovation, you can simply borrow the money you need from a relative or a friend. Just be sure you establish a repayment structure up front.
- Personal Savings – If you have a savings account, you can use that money to fund your renovation. Or, borrow money from your retirement fund, if you have one, and try to repay the borrowed money gradually through monthly deposits. This way, you do not have to negotiate with other people or lenders nor will you have to deal with interest.
Before applying for loans or choosing a financing option for your home renovation, talk first to your financial planner, so he or she can advise you on what the best option is for you.