Home upgrades and renovations can breathe new life into your living space and increase the value of your home. Improving your home is money well spent. However, financing these projects can sometimes be a challenge. Whether you’re planning a minor renovation or a major overhaul, here are some ways to finance your next home upgrade.
Savings and Budgeting for The Upgrades
One of the easiest ways to finance a home upgrade is to do it in cash. Saving for a specific upgrade ensures that the upgrade will be cost-effective. By saving up for your project in advance, you can avoid interest charges and the need for additional financing. However, this is not the quickest way to finance upgrades for your home.
Create a budget and set aside a specific monthly amount dedicated to your home upgrades. Patience and saving over time can help you finance your home upgrades without incurring additional debt. Using savings is a long-term approach to financing your upgrades, but it can relieve stress over accumulating debt.
A Line of Credit Based On Your Home Equity
A Home Equity Line of Credit (HELOC) allows you to borrow against the equity you have built in your home. It is a revolving line of credit, like a credit card. You can use HELOC to finance your home upgrades. However, the debt is against your home and must be repaid if you want to sell it. If you don’t pay for the loan, you could risk foreclosure.
To qualify for a HELOC, you typically need to have a good credit score and sufficient equity in your home. The amount you can borrow will depend on factors such as your home’s appraised value, the outstanding mortgage balance, and the lender’s requirements. These loans have a variable interest rate.
Straight Home Equity Loan
A home equity loan is similar to a HELOC in that you use the value of your home’s equity as collateral; however, unlike a HELOC, you get the money in one lump sum. A home equity loan also differs because the interest rate and term are fixed.
You will need to have a sufficient amount of equity built up in your home, good credit, and meet the lender’s requirements to get this type of loan. It can be a good way to finance your home upgrades. Think of it like the house paying for its own upgrades.
Credit Cards
You can use credit cards to finance your home upgrades, but be careful it can be a slippery slope. You never want to get in over your head with credit cards. Be sure that you read your contract with the credit card company. According to the DOJ, contracts are the basis of most legal agreements, even between employers and employees. Read your terms and contracts to understand your responsibilities to the credit card company.
Use credit cards with low-interest rates that offer bonuses like cash back. If you play your cards right (pun intended), you can reduce the cost of using credit cards to finance your home upgrades. Just keep your eyes wide open if you decide to take this route.
Reduce Project Costs
Before you start your upgrades, fix what needs to be repaired. For example, fix your water heater before you move on to basement refinishing. According to Forbes, one of the key reasons a water heater needs to be repaired or replaced is because it is over ten years old and slightly neglected. Make repairs before you make upgrades to reduce the overall cost of the upgrades.
Another example is upgrading your exterior without first addressing the tree root problem. According to the U.S. Department of Agriculture, the most common sewer line problems stem from tree roots in the line. Spending on upgrades before you get repairs wastes time and effort and ultimately will cost you more in the long run.
There are creative ways you can finance your next home upgrade. Sometimes you have to think outside the box. Learn some tips and tricks for saving money and finding the money for your next upgrade.