You’re finally ready to tackle that big home renovation project you’ve been dreaming about for years – congrats! Now that you’ve made your ideas into reality and got the plans all set, here comes the most challenging part of the adventure – figuring out how to pay for it.
According to recent studies by home experts, the average complete home renovation costs between $44,000-$75,000 depending on the number of rooms, scope and labor. But higher-end remodels, with updating plumbing, roofs, siding, etc., can run homeowners upward of $200,000, leaving many to wonder (how to finance home renovation).
Most people don’t have that kind of cash in the couch cushions. So, finding the right loan is important to get your project rolling and ensuring it gets completed without placing you in financial hardship.
Use this guide to find out more about (how to get a home improvement loan) for your renovation plans.
A home improvement loan can be used to cover the cost of nearly any project done on your house. Loans are provided by a number of providers, from traditional banks to online lenders. Generally, you will receive your payment as a lump sum and then begin to pay the loan back once the funds have been used. There are several different types of home improvement loans:
There is no one-size-fits-all home improvement loan. What works best depends on your financial situation, the equity you have in your home and the size of the project. If you can get a low interest rate, then a cash out refinance may save you the most money. If you have one big project, then a home equity loan might work best.
If you are buying a fixer-upper home, the FHA 203(k) program could be a winning option. It includes home improvement costs within the overall loan. If you need funds quickly, a personal loan should be your target.
If you are working on a home renovation project yourself, you may want to explore credit cards offered by the major home improvement chains or your financial institution. Store cards can offer you cash back on purchases, and some may have fixed payment plans like personal loans.
Bank cards could be an option for bigger projects, especially if you can find one with zero percent interest for a year or longer. If you can pay off the cost of the work before the interest kicks in, it can save you some money.
Getting a (home improvement loan with bad credit and no equity) can be difficult. Many of the loans mentioned above require excellent credit to get the lowest interest rates. However, there are other options for people whose credit needs a little help. Securing a personal installment loan gives you the ability to have funds for a major expense and pay it back with fixed terms, set interest rates and monthly payments.
Rates on loans can range anywhere from 3 percent to 36 percent. It’s important to shop around and determine the best possible option for your project. HELOC loans usually feature the lowest rates, while credit union loans have lower interest rates than banks.
The IRS recently clarified its position on deducting interest for home improvement loans. If you’ve taken a loan since Dec. 2017, and the loan is used to buy, build or substantially improve the home, then it is eligible for deductions. Some of the projects the IRS considers substantial are:
