3 Ways to Finance Your Home Renovations

So you want to make a renovation or major upgrade to your home. Maybe you want to remodel a room or tear it down and rebuild the whole thing. No matter what your plans are, there are three options you can choose from to renovate and repair a home with someone else’s money.

If you’re planning on living in your home for a while but want to do some major renovations, you have options. If you have a lot of equity built up in your home, you can borrow up to 80% of that through a cash-out refinance. Interest rates remain low, and you can amortize that money over 30 years. 

A short-term option is a home equity line of credit or HELOC. They’re fairly cheap to acquire, meaning they have fewer closing costs than a refinance, and they are typically used for temporary improvements because the rate is variable. They charge you interest only, so you’d manually have to pay the principal down over time. It’s not the best long-term solution, but it is a flexible one.

With these loans, you aren’t paying interest on the money until you use it. If you’re not planning on doing those renovations for a while, it would be kind of expensive to take it all out at once and pay interest on it each month.

A hybrid solution is a renovation loan. It’s typically a two-step process. These tend to be a little pricier than a cash-out refinance, but they will let you use the after-improved value of the home. If you don’t have enough equity, a renovation loan might make sense for you. You can’t refinance this loan until seven months have passed, and you may be in a better financial position by then. You’ll set up the plans for your improvement, and you’d get all the money at once in an escrow account. 

If you have any questions about any of these options, which is right for you, or anything else related to financing improvements for your home, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Teaser: There are plenty of homeowners out there who are looking to improve their homes through renovations and upgrades. The problem is that many of them don’t have the money to make those fixes. If you’re in the same boat, it’s important to know that you have three great options. The first is a cash-out refinance, which will let you borrow up to 80% of your equity and keep a low interest rate. To learn more, watch this short video.