5 Tips to Help Fund a Home Remodelling Project

A home renovation project may be one of the largest investments you will make in a lifetime.  It is hard to determine the best advice for everyone because your personal financial situation will vary as much as the project you would like to complete.  For the sake of this article, I’ll assume an average home income and a >$5,000 budget to help complete some surface enhancements (wood flooring or tile, paint and moldings), fixtures, and some lighting updates in your home.

** Check out our article on Home Maintenance Cycles to help look at what you should be budgeting each year to maintain your home.  It wouldn’t be a good idea to extend credit to cover an aesthetic project if you have major maintenance issues in the horizon.

1./  If your project is a high priority, you can always begin by creating a savings plan to pay for the updates over 1-2 years ($200-$400/month).  Open a separate savings account to track your progress and automatically deduct from your bi-weekly paychecks to ensure it remains a priority.  Everyone has tough months so if money is tight for a short period, you can delay the purchase or finance the balance when you decide to buy.  The savings process will ensure that you can pay back any of the financing options I’ll outline below as well because you will be accustomed to the deductions from your monthly earnings.

2./  Interest rates remain low, but loan approvals are strict compared to a few years ago.  If you have saved some money and consistently pay your bills, you could secure a short term loan or line of credit with your bank to help pay for renovations.

3./  Only use your credit card for smaller transactions, product purchases or milestones from installers.  If you are planing to put an entire >$5,000 remodeling project on your Visa /MC / AMEX etc. ensure you have a plan (ie line of credit or secured loan) to minimize the impact of an 19-21% annual interest hit.  Read the fine print on big box stores that may offer their own credit card or payment terms.

4./  You can also remortgage your home to use the equity against a remodeling project.  If the timing is right and you are already renegotiating your terms, ask your banker what your options are.  Remember that when you remortgage to free up cash, you will essentially be paying a term of interest on whatever purchase you use the money for.  It might be easier to set up a short term loan (or start saving) if you are looking at financing a smaller project.

5./  A hybrid solution will probably be your best option; combining any of the prior funding options will help you reach your project goals.  Ensure you minimize charges to your visa or prioritize paying off higher interest loans or visa balances after the first month.

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If you are looking for a professional to review or estimate your project, please go to TopInstallers.com and search our network of installers in your area. Be sure to check out our articles on How to Choose a TopInstaller and Who is Responsible for Renovation Issues for more information. Note: We are not directly affiliated with the installers on our site (and ratings are crowd-sourced) so conduct your due diligence before hiring any pro.

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