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4 Practical Approaches to Financing a Home Renovation

There are several specific ways you would like to update your home. Perhaps the kitchen and bathroom could use a makeover or the time has come to finally finish that basement and convert it into living space. Whatever plans you have for the home, it will take money to get the job done. Here are four possible ways to go about financing the home renovation.

Saving Your Cash

One possibility is to start setting aside funds into some sort of interest bearing account. This works fine when there is not a need to complete the renovation in the immediate future. Over the period of a couple of years, you deposit money into the account each month and gradually build up enough to take on one or two of the improvement projects you have in mind. This approach allows you to make the changes without incurring any debt.

Taking Out a Home Equity Loan

As the name implies, a home equity loan is a lending arrangement that is based on the amount of equity you currently have in the home. Many lenders will extend loans based on a certain percentage of the current equity. If that percentage or a little less is enough to cover the costs of the renovation project, this solution will work well.

Keep in mind that you do need to think about how the monthly payment on the loan will fit into your budget. Before you talk with a lender about any options for home loans make sure you have a definite plan for making the payments on time every time. Along with making the lender more confident in your ability to manage the debt, you will feel less stress as you pay off the loan.

Securing a Second Mortgage

Another way to finance your home improvement project is to take out a second mortgage. Even if your credit is not the best, the fact that you have steady income and a reasonably attractive debt to income ratio if often enough for lenders to extend offers for Barrie second mortgages. This is especially true if the current market value of your home is more than the combined total remaining on your primary mortgage and your new second mortgage.

Pay as You Go

There’s also the pay as you go method. In this scenario, you have improvements made here and there as you can afford them. This often means breaking down a renovation project into a series of tasks and prioritizing each one. Once you finish and pay in full for one task, move on to the next.

Perhaps the plan is to redo the kitchen. You may begin by refinishing or replacing the cabinetry. Once that’s done and paid for, you move on to replacing the floor tile. After that, you focus on purchasing new major appliances one at a time. While this will mean the renovation is in progress for several months, it is eventually completed and there is no remaining debt to cover.

Only you can decide which approach to home renovation is right for you. Talk with a lending professional today and compare the merits of each option. Even if your credit is not the best, there are solutions that will fit into your budget with ease.