For a homeowner, there are very few things as exciting yet challenging as a home improvement project. Improving on an aspect of your home allows you to experience better performance, a style that reflects your personality, and can even increase the value of your home. However, before you can get started on your next home improvement project, you’ll need to determine how to pay for the investment.
The good news is that when it comes to renovations, homeowners have a lot of different options for financing a project of any size or scope. In this article, our expert team of home remodeling professionals at All Weather Seal of West Michigan will explain the merits of some of the most commonly used financing options available, so that you can make the choice that’s right for you and your home improvement goals.
Cash or Credit? Evaluating Your Financial Commitment
The chances are that you’re aware of the possible financing options for home improvement, but how do you choose between them all? Deciding which option to pursue requires a lot of thought and planning between the heads of the household, the institution you’re borrowing from (if applicable), and other considerations. In most cases, the goal for financing is a viable plan that will help you get started as soon as possible, but that will also be affordable down the road.
One of the most common pitfalls with a home improvement project is ending up financially in the hole. Either you’ll have a half-completed project because you ran out of money, or you’ll still be paying it off ten years after the project is completed. Be sure to take all of the options into careful consideration, evaluating the potential outcome against the financial commitment you’re taking on.
What Are Some of the Most Common Financing Options?
You’re certain to be aware of these options for financing your home improvement project. In any case, knowing the benefits and downsides to each of these options is important. Some of the most common financial options include:
- Cash: The simplest option for homeowners to pursue to finance their home improvement is to pay with cash. This option is most appropriate for smaller projects, as larger renovations can be quite costly—and saving up can be difficult or impossible. Obviously, the benefit of using the cash option is that there are no finance charges, interest, payments, or foreclosure risks. However, if the project you have in mind is a large one, using your nest egg for renovations might feel too intimidating. If that’s the case, you may want to consider financing to better afford the project.
- Credit Card: When your project is larger than you can comfortably afford out of pocket—but too small to run the risk of a loan, you may want to consider using a credit card. This option lets you pay for the whole project immediately, and then make monthly payments to the credit card you already have. Keep in mind that credit cards generally have higher interest rates than loans, but you do avoid paying closing costs. To minimize the impact of your interest rate, make sure you can pay the balance off in six months or less.
- Home Equity Loan: A popular option for homeowners that want to take on a large project is a home equity loan. This kind of loan uses your house as collateral, similar to a mortgage. This option can help you get a large amount of money since your borrowing against the value of your home, minus the amount of your existing mortgage (the equity). Additionally, the amount borrowed, and the interest rate is fixed, making this an attractive option for those concerned about the possibility of rising interest rates. However, with this option, you pay closing costs as well as run the risk of foreclosure if you can’t keep up with the payments.
- Contractor Financing: Another popular option for homeowners is to apply for financing through the contractor of their choice. This option has become more popular due to the ability of contractors to create finance packages that may be better than other options involving credit. Keep in mind that with contractor financing you are limited to the banks and creditors they work with instead of choosing your own lender.
If you’re ready to explore your finance options with a reputable and professional home remodeling contractor, consider checking out our financing options with All Weather Seal of West Michigan. We offer a variety of attractive and accessible financing and payment options designed to assist you in making the home of your dreams a reality.
For more information about financing your home improvement project, contact us today at All Weather Seal of West Michigan. To get started, give us a call to speak with a home remodeling agent, or go online to schedule your free, in-home consultation today.
Subscribe to All Weather Seal of West Michigan's Blog