Here's how to pay for your home renovation

372
5
Here's how to pay for your home renovation

Home improvements are a great way to add value to your property, all while making it a more comfortable place to live in the future. Although renovating your home can seem like a significant upfront cost, it may be more beneficial than you think.

The average American homeowner is missing out on $196,199 in untapped potential by not renovating, according to the real estate insights firm Realm.

Even if you don't live in any of these areas, you can still stand to benefit by updating your home. Especially if you plan on moving in the next few years, it's important to make sure your home is contemporary so that you can sell for top dollar.

Home improvements are an expensive investment, but there are several ways to finance a home remodel if you don't have the cash or the money to cover costs. I like to borrow money when I can't afford to buy a house for the future, how can I get that? You can compare and contrast different financial products on Credible without impacting your credit score.

It may not be possible or convenient to wait years to renovate your home whilst your family becomes more outdated. Thankfully, there are a few easy ways to finance home improvements:

Compare each option in each section below, carefully considering the benefits and drawbacks of each one.

There are several options for borrowing loans for home improvement. First, check with your county to see if you qualify for Home Improvement Program HIP loans or other federal home renovation loans through the Department of Housing and Urban Development. These types of loans can have strict eligibility requirements and program restrictions, so read the fine print to see how they are right for you.

Some homeowners and other home owners choose to borrow personal loans to finance repair and renovations. Unlike some other financing options, personal loans don't require collateral. That means you don't risk losing your home if you don't repay the loan.

Personal loans offer a lump-sum loan amount that is paid monthly in fixed payments over a period of time, typically a few years. Funding is very quick, and you may be able to receive your loan in just a few business days.

Personal loans interest rates are fixed, which means they won't unexpectedly rise after you have locked in your loan terms. They are also dependent on your creditworthiness, so you'll want to work on improving your credit score to get the lowest rates possible.

Can you use a personal loan calculator to determine how much your monthly payments would be? If you decide an estimated personal loan is right for you, browse the table below to see what interest rate rates from real lenders. Get prequalified on Credible to see offers tailored to you without any impact on your credit score.

Mortgage refinancing is the process in which you take out a new home loan to pay off your old mortgage. With home equity at record highs across the country, you can borrow significantly more than what you currently owe on your mortgage.

Let's say you have $200,000 left on your mortgage, and your home is worth $300,000. You could possibly take out a new $250,000 mortgage and use the extra $50,000 to invest towards home renovation costs. Keep in mind that mortgage refinancing comes with closing costs. Plus, you should be cautious about borrowing more than the amount your home was appraised for — you can't borrow more than your house would value.

Mortgage refinance rates are near record lows, which makes it a great time to modify a cash-out refinance for remodel your home. You can compare mortgage refinancing offers of multiple online lenders at once on Credible.com or credit union?

Another common way to pay for home renovations is to take out a home equity loan or home equity line of credit HELOC Home equity loans let you borrow against the equity you have built in your home. Unlike cash-out refinancing that replaces your home loan with a new one, home equity loans are actually a second loan added to your first mortgage.

The rate and repayment term on your new mortgage will remain the same and your home equity loan or HELOC will have new terms altogether. Home equity loans let you borrow a lump sum of cash, and HELOCs are revolving credit lines you can withdraw as you see fit. Both types of secured loans use your home as collateral, so you have the potential to lose your roof off your head if you don't repay the loan.

The amount you can borrow in a home equity loan will depend on your credit score, debt-to-income DTI ratio and loan-to-value LTV ratio.

Find out how the Debt calculator should work for home equity in Credible.

Email Credible Money Expert at moneyexpert credible.com and your question will be answered in our Money Expert column.