If you’ve decided that you want to take the plunge on a home improvement project, your next decision usually centers around how you’re going to pay for it. Of course, in a perfect world the money for your home improvement project is in your bank account just waiting to be spent; however, studies show that 75% of projects over $2,500 get some form of financing.
Homeowners have several options for securing capital to complete these projects. The financing you choose will depend on your unique circumstances and preferences. Many homeowners value convenience and flexibility while others look at the big financial picture and the bottom line when making these kinds of financial decisions.
Home Improvement Contractor Financing Options
Many contractors, including Home Town Restyling, offer home improvement financing via their own network of lenders. These programs are convenient, fast and flexible. Options include:
- 12 months same as cash
- Competitive interest rates (currently 6.99% for 84 months)
- Low monthly payments
- Financing up to $55,000
With contractor financing, there’s no need to take time off work and go apply for a loan. The application and approval decision is completed during the in-home quote in less than 10 minutes. In addition, you are not committed to the loan until the work actually begins. For instance, you can apply for financing through your home improvement company but if you find a better deal through another lender or choose to pay out of pocket instead, you can cancel the financing at any time before the work begins at no cost. Finally, no payments are due on the loan until 30 days after the completion of your project.
Home Equity Loan or Line of Credit
Some homeowners may prefer to tap into the equity in their home to pay for their project. This can be set up as either a home equity loan or a line of credit using the equity in the home as collateral for the loan.
Generally, the interest rate on these loans is lower than a credit card (though not as low as a typical refi) and you can access it easily if you are planning several projects over a long period. Your bank will likely add processing fees to the loan and the loan will take 45-60 days to close. You may have to take time off work to apply for the loan, get an appraisal and attend the closing meeting.
Refinance Your Home
With mortgage rates at historic lows, many homeowners consider refinancing their mortgage loan to pay for home improvement projects. Depending on how much you’ll be able to reduce the current interest rate and the amount you need to borrow, this makes good sense for some people. Like the home equity loan described above, you’ll need to devote quite a bit of time to loan processing.
Run the numbers carefully when you consider refinancing your home loan. When you do a cash-out refinance like this, you replace your current mortgage with a larger loan. This not only reduces the equity you’ve already earned, you also extend the term of your loan, pay interest for a longer period of time and incur significant closing costs.
Home Town Restyling is a full service home improvement contractor with licensed and insured crews on staff for professional installation. Stop by our showroom or contact us today for more information. You can also download your FREE Guide, Iowa Contractor Comparison Guide – How to Make Your Remodeling Project a Success for more tips on hiring the right local contractor.