Home Improvement Financing Options

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The one factor that usually prevents people from improving their home is money. Having the money to commit to a home improvement project, whether done by yourself or someone else, is almost always a factor in making your home more livable. But with a little creativity you can often come up with the money you need to finance that home improvement project so that your current house can become a dream home.

Home Equity Line of Credit – Sometimes called a HELOC (Home Equity Line of Credit) this is basically a loan from the bank where you use part of your home’s value as collateral. For example, if you owe your bank $100,000 on your mortgage, but your home is really worth $175,000 then you could conceivably get a line of credit from the bank for that $75,000 in equity or “extra value” your home has. You may or may not actually get a check from the bank. Sometimes you just get a “credit amount” to use for whatever you want. HELOC loans typically allow you to write checks or even use a check card to pay people, and the amount is automatically paid out of your value. So if you have your bathroom remodelled but you’re not sure what the total cost of the project will be, this might be a good option. Let’s say you spend $10,000 on your bathroom. You may still have $65,000 in “credit” which you can spend or not. Remember: you do have to pay it all back 🙂 There are lots of different rate and payback options available with Home Equity Lines of Credit.

Home Equity Loan – A home equity loan is similar to a Home Equity Line of Credit, but it’s usually for a fixed amount. In this case you may just get a straight check that you have to begin paying back on a regular schedule. These are usually better if you know exactly how much you need to spend and you don’t want to spend any more. You’ll want to talk to a banker about both the HELOC and Home Equity Loan to find out which is better for you. I like to go through the same company as my mortgage just to make things easier. You can sometimes save some filing and appraisal fees this way as well.

Home Store Financing Deals – You probably won’t find this at your local hardware store, but some of the large home improvement stores offer their own financing and sometimes you can get a pretty good deal depending upon the size of your project. They often run specials where you can get a year of free or no interest financing for your home improvement project provided you spend a certain amount of money. This option is good for those smaller projects where you don’t have the money readily available but spacing the payments over 12 months wouldn’t be all the painful. My wife and I bought several major appliances and replaced several exterior doors with a financing deal when we first moved into our new home. We needed the doors and the appliances immediately, but we didn’t want to spend all our money right away, so we got a zero interest plan for the first year. It was essentially just a credit card. We paid off the loan over the year in small increments and never paid a dime in interest.

Sell Left Over Materials from Your Home Improvement Project – This is a little unconventional and it’s doubtful that you’ll end up getting nearly enough money to pay for your entire home project, but it could bring in a few bucks. If you’re doing any sort of renovation or removing any older materials from your home remember that though you may not want the items, they could still have value. This means that you may want to reconsider knocking out those 20 year old kitchen cabinets with a sledgehammer if you know someone who is looking for cabinet just like the ones you’re trying to replace. I’ve seen people sell old cabinets, wood from floors, old landscaping stones, ripped out bushed and trees and even old roofing shingles. Not only are you making some extra money to pay for your project, but you’re also recycling products and putting a little less trash in the local landfill!

Sell That Junk in your Basement, Attic and Closets – This is another method for financing a home improvement project that most people don’t initially think about. This is obviously dependent on the size of your home improvement project and the value of your junk! There was actually a short-lived HGTV show which featured an antique appraiser who came into people’s homes, appraised their “junk” and then they took the items to auction in hopes of raising enough money to pay for a home renovation or improvement project. There are lots of places to sell your items, from eBay to local flea markets to having a yard sale on your lawn. We moved three years ago and my wife and I are still going through old boxes and putting up items for sale. We’ve made several thousand dollars over the last couple years and we didn’t have any valuable antiques or pieces of furniture. We’re just slowly selling things for $10 – $20 at a time that we’ve accumulated over the years!

As always, don’t get caught up in the project and lose track of what you can and cannot afford. Just because you’ve always wanted a gold plated bathtub with floor to ceiling marble walls doesn’t necessarily mean you can afford it. Budgets matter and if you aren’t careful you can easily spend yourself right out of that dream home before you have a chance to enjoy it. Be smart and if you have home improvement financing questions you should really talk with a banker or financial consultant.

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