Looking to add more value to your home, or are you just tired of looking at the same old dull walls? If so, then making some significant home improvements is unlikely to be far from your thoughts. The only trouble is – where are you going to get the money to pay for all the work? You have plenty of options available to you regarding financing. Today, We’re going to look at five of the most common areas to fund your fixes and make your home a nicer – and more valuable – place to live.
0% credit cards
If you are making some minor fixes and can afford to pay for them over a year or 18 months, then look into a 0% credit card. Again, you’ll need an excellent credit rating, but it is essentially a free loan. Plus, if anything goes wrong with the building work or the materials you use, you can claim the money back from your lender.
Raid your savings
If you have plenty of savings stashed away, think about releasing them to pay for your renovations. Make the right improvements, and you can get more for your money than leaving it in a standard savings account. For example, installing a new bathroom can lift the value of your home by anything up to 3% – and an excellent new kitchen could raise the value by 5%. If that figure works out higher than your current savings by the time you want to sell, it’s worth investigating. Just be careful about drawing out money from an account that will hit you with removal penalties. You might end up losing money, rather than making it.
Get a loan
Banks often lend money to people looking to improve their home. It’s worth thinking about if you are getting major work, such as a loft extension. You will need a good credit rating if you want to get the best rates, however. Or, you could look into secured loans, which will be guaranteed by the value of your home. These can be risky, however, as you risk losing your property if you fail to make repayments. There are other options, too – check out this guide from Hard Money Phoenix for a thorough guide to hard money loans. They are often used by property investors to pay for fixing up property, but private homeowners can use them, too.
You can also use the equity in your home to pay for renovations. The average lender will allow you to borrow up to 85% of the value of your home with an equity loan, depending on how much you have paid back already. Equity loans will only be worthwhile if you have paid off a significant portion of your original home loan. Bear in mind that when you sell your home, you will only get back what you have repaid.
You can also cash out your original mortgage total and replace it with a new one, including a loan for repairs. So, let’s say your home is valued at $300,000. You have already paid off $150,000 in mortgage payments, leaving you the other half to pay. You could cash out your home loan and apply for the costs of your renovations – $75,000, say. So, the bank will rejig your mortgage, leaving you will $225,000 outstanding for the duration of your new home loan.