There are many reasons why you might want to conduct a home improvement project this summer season. For one, the weather is just right for any indoor and outdoor work, and the fact that there’s minimal chance of rain works in your favor. But beyond the environmental conditions, conducting a home renovation is just a great idea if you want to add value to your property. This will help you sell it fast should you ever decide to move, but it’s also a great idea to invest in rental improvements to attract quality tenants.
Whether you’re investing in improvement for your own home or your rental unit, though, the common problem that occurs is the problem of money. Financing a home improvement project is not an easy task, but it’s doable if you know which financing routes to take. With that in mind, today we’re taking a look at the most effective ways to fund a home improvement project to add value, function, and aesthetic appeal to your property.
Get a home improvement loan
To start, one of the common ways that homeowners choose to finance their small-to-mid-sized home improvement projects is through a home improvement or home repair loan. These are unsecured loans offered by banks, online and offline lenders, and credit unions. Because they are unsecured, you can qualify for a home improvement loan without having to put your home up as collateral. Instead, your interest rate and qualification will be determined by your credit score.
If you have a good credit score and a clear credit history, you can expect to get higher loans and more favorable repayment terms. That said, these come with shorter repayment timelines and potentially higher interest rates because they are unsecured. For this reason, they are best used for smaller improvement projects around the house.
Pay for minor improvements with your credit card
Moving along, you can also finance some other small or mid-sized home improvements with your credit card. If the unsecured loan doesn’t cover everything you want to get done around the house, then you can definitely look to your credit card provider. Depending on your credit card plan, you can enjoy an interest-free period, which typically lasts several months.
This is a great way to finance your home improvement projects without ever paying any interest, especially if you’re using a zero-percent introductory card. What’s more, some credit card plans offer great reward programs, giving you cash back perks the more you spend on your upgrades.
That said, keep in mind that it’s not the best idea to pay for cumbersome home improvements with your credit card. For example, if you’re unable to pay off the introductory fee before it expires, you will be required to pay some hefty interest rates. This is not a good way to create a positive ROI on your renovations, especially considering the fact that the credit card interest rates can be much higher than what many lenders offer.
Consider refinancing your loan
Refinancing is one of the most popular ways to fund your home renovations because it allows you to get a decent loan that will allow you to finance the more cumbersome improvement projects. This is something you want to talk to your mortgage broker about when you’re buying a house because you want to be prepared for such an eventuality.
To refinance a home loan means to replace your current mortgage with a new one, which comes with a new interest rate. You can get a bigger loan the second time around with a lower interest rate, allowing you to set the difference aside for those renovations.
This is a popular trend in thriving residential markets like Australia, and especially Sydney and other popular markets, where home loans and refinancing terms are becoming increasingly more favorable. Future homeowners will first find a mortgage broker in Sydney that can offer a good home loan and a sensible long-term plan. This plan will allow the homeowner to refinance the loan for a better interest rate and even a bigger loan amount, allowing them to cover all the necessary home improvements.
This is something you should look for wherever you’re buying or already own a property, and if you choose the cash-out to refinance option, you can get access to funds immediately. If you choose the rate-and-term to refinance option, you will get lower fees and interest rates, but you won’t receive the funds like with the former option. If you can secure a lower interest rate with mortgage refinancing, it’s a great option to lower your expenses and get the necessary finances to conduct all home improvement projects.
Try crowdsourcing your home renovation
One of the more creative ways of financing your home renovation is through crowdsourcing. This means asking family members and other people to put money towards your renovation project, with the promise of you paying them back within a specific timeframe. If you have any wealthier family members or friends, they may be willing to loan you the money or even give it as a gift, or they can even apply for a loan at their bank and give you the money if you’re unable to secure a loan yourself.
See if you’re eligible for a government loan
Another option worth considering is a government loan. Being eligible for a government loan will depend on your local laws and regulations, and of course, the type of loans your country offers to its residents. For example, given the fact that Australia is nowadays big on clean energy, homeowners can oftentimes get great financial incentives to switch to solar power.
In the US, on the other hand, homeowners may be eligible for the HUD Title 1 Property Improvement Loan. The U.S. Department of Housing and Urban Development may allow you to borrow up to $25k without having any equity in your home, but keep in mind that some upgrades may not fall under the loan terms.
Over to you
Financing a home improvement project can seem like a daunting task, but there are numerous routes you can take to get the money you need to spruce up your property. Consider these funding options to bring your home back to its former luster, and even add value to the property with some amazing upgrades and improvements.