A lot of people understand how the home loan process works when you’re buying a new home. When it comes to securing financing for a home improvement project, however, things aren’t as straightforward.
As a property owner, you have a lot of options when you want to make an improvement to your property. There is also more room for missed opportunities and expensive mistakes because you have so many options. One wrong move could cost you thousands of dollars in fees or high-interest costs.
Instead of stepping into the process without all the facts, we’ve put together these answers to common questions about home improvement financing to ensure you get the home loan guidance you need to make well-informed decisions.
When Should I Use a Personal Loan for Home Improvement Projects?
One way that people finance home improvement projects is with a personal loan. With this type of financing, you don’t have to refinance your mortgage or deal with the often demanding amount of paperwork that comes with taking out a home loan. But, you won’t be able to finance more expensive home improvement projects. Most banks offer personal loans ranging from $5,000 to $40,000. Also, keep in mind, personal loans are usually a short-term option so you’ll make high monthly repayments to repay the loan within a handful of years, similar to an auto loan.
If you have a smaller project – for example, you want to install a new bathtub and tiling rather than doing a full bathroom renovation – a personal loan can be a great option. You can get the work done that you need, enjoy your newly installed tub or other improvements, pay off the loan in a few years, and move on with your life. While personal loans – which are usually unsecured – tend to have higher interest rates than a home loan, if you repay the loan in four years instead of the twenty or more years you have to repay the rest of your mortgage, you may pay much less in interest overall.
What About Using My Mortgage for My Home Improvement?
As long as your home loan is in good standing and you haven’t had any late payments, you may be able to use your current mortgage to finance your project. There are so many different ways to do this, and there is no best way – it depends on how much you need to borrow, your timeframe for paying back the money, and your financial situation.
That’s why it’s always a good idea to talk to financial experts to get the home loan guidance you need. At Pure Finance Group, our loan brokers can help you find the best loan for your situation. Whether you want to use a cash-out refinance, use the equity you’ve built up for a home equity loan, or you want to include home improvement financing in your original mortgage for a new home, we’ll walk you through the benefits and drawbacks of each option and how each may impact your finances.
Can I Finance My Project with a Credit Card?
Some people choose to use their credit card to pay for smaller home improvement projects. If you don’t want to apply for a personal loan or deal with your mortgage, using a credit card is an option although it can be the most expensive one. Because credit card interest rates are much higher than rates for personal loans and home loans, only use your credit card if you’re confident you can repay what you spend right away.
For more home loan guidance for your home improvement project, reach out to our team of financial experts today. We can work with your contractor and you to find the best solution for your project goals.