With the increasing popularity of shows like Fixer Upper, Flip or Flop, and Love It or List It, many people are choosing to remodel their homes to keep up with today’s home trends and design. Something as simple as a fresh coat of paint or some new bathroom hardware can really spruce up a space and breathe new life into a home, and many people are even opting to DIY these projects rather than paying a professional to do the job. However, home remodeling projects can often be expensive, especially for bigger tasks, like a total kitchen remodel or home addition.
When it comes to home improvement financing, here are the top 3 ways many people choose to make it work.
Taking out a personal loan is one of the most common methods of financing a home improvement project. A personal loan is a loan that is given based on factors like your income and personal credit score. The higher your income and credit score are, the more money you are likely to be loaned. A personal loan lender typically won’t take your home into account at all. Before applying for a personal loan, you should be sure that you have a good chance of getting approved, as applying for a loan will typically take a hit at your credit score by a few points.
Using a credit card to finance a home remodeling project is another common method many people choose to use. Credit cards can be great tools for not only paying off expensive purchases but also for improving your credit score by showing a consistent and on-time payment history. If you choose to use a credit card to pay for your home improvement project, be sure that you can afford whatever amount you are charging, as you should never charge anything to a credit card that you absolutely cannot afford. It is also crucial that you pay your credit card bills on time and consistently until the entire project is paid off, as to avoid increased interest and your credit score taking a dive.
If you have never heard of a cash-out refinance, the concept is simple. A cash-out refinance is a type of mortgage refinance that uses the equity you have built over time and gives you cash in exchange for taking on a larger mortgage. By choosing a cash-out to refinance, you are basically changing the terms of your mortgage and cashing out a percentage of the equity you have in your home. Cash-out refinancing is a great method of financing a home improvement project, as you are then able to use the proceeds for your project.
Before deciding on the route you are going to take to finance your home improvement project, be sure to thoroughly go over all of your options and do your research to find the one that makes the most sense for you. It can also be helpful to talk to a trusted financial advisor to help you make your decision.