In reality, there are 11 main ways to pay for renovations. However, in this article, I’ll go into depth on 10 creative ways to pay for home improvement because the eleventh way is cash. Cash is a stress-free way to cover home improvement costs. It’ll keep you from touching the equity in your home, and you won’t have to make any future payments. However, if you’re short on cash or would like to get a loan to pay for home improvements, there are 10 options that can help you with your next home improvement project.
* If you’re short on cash and still want a stress-free way to deal with home improvements, make sure to check out the end of the article! *
- Refinancing Your Mortgage
- If you’re planning on refinancing your loan anyway, this is the best option for you.
- Home Equity Line of Credit (HELOC)
- To get a HELOC loan, you must have equity in your house. The loan is similar to a Home Equity Loan, but it acts like a credit card with a flexible interest rate. You’re approved to spend up to a certain amount of your equity, and you can spend as much or as little of that amount. You then pay back the loan like a credit card. The catch, the interest rate is flexible. If you think interest rates are going to go down in the future, this might be a good option for you.
- Home Equity Loan
- A Home Equity Loan is a loan for a set amount with a fixed interest rate. In contrast to a HELOC, you take all the loan capital out at one time with a fixed interest rate. Home Equity Loans are a great option when interest rates are low.
- Construction Loan
- Construction Loans fund large renovations or construction costs when building a house. If your renovation costs more than the equity of your house, then this is a loan option. The only issue is that these loans are not easy to come by and there are many requirements that come with them. For example, the money can only be acquired when certain stages of the renovation or construction are complete.
- Credit Cards
- Credit cards are a good option for small renovations. You might not be able to pay contractors with a credit card, but you can tell your contractor that you want to pay for materials with your credit card.
- Borrow from Your 401K
- For this type of loan, you’ll have to pay back the loan over five years. The monthly payments will be taken from your paychecks. The catch with this loan is that the balance will be due immediately if you quit your job.
- Federal Housing Administration (FHA) Limited 203(k) Loan
- Limited 203(k) loans allow homebuyers or homeowners to finance up to $35,000 into their mortgage. Limited 203(k) loans can be a terrific way to prepare your home to be sold if you are looking for a long-term loan with a relatively low-interest rate.
- FHA Title 1 Loan
- Title 1 loans can loan up to $25,000, and the terms can be up to 20 years. This loan does not require equity in a house. These loans take time to get and come with a large amount of paperwork. Just make sure that you aren’t paying for repairs long after they need to be replaced.
- Reverse Mortgage
- If you’re 62 or older, you can get a reverse mortgage. These loans are great for people that are looking to retire in their home. If you have a large sum of equity in your house or own your home, you can sell equity back to the bank in exchange for cash. The best part of this loan is that you aren’t required to pay back the loan until the home is sold or you move. However, if you are looking to sell your home, this is not a great option.
- Contractor Financing
- Your contractor may have relationships with certain financiers and can possibly make an arrangement to finance your project, but generally, you can get better financing on your own.
The Easiest Way to Deal with Stressful Renovations
The quickest and easiest way to deal with your renovations is to not deal with them at all! Crazy, right? If you’re renovating your property and would like to sell your home, skip the renovations and sell your house by calling a real estate investor.
Real estate investors can help you out if you’re in a tough situation. However, all real estate investors are not equal. A small company or an inexperienced investor can leave you in a last-minute jam. The reason is that some companies will give out empty promises of purchasing your house, but in reality, they may not have the funds to back up their promises. If an investor or small company decides that they cannot afford to buy your house, you’ll be left with an unrenovated house and possibly months of extra mortgage payments.
If you want to get rid of all the risk, then you need to turn to a larger home investor company, such as Express Homebuyers. Express Homebuyers has purchased more than 2,500 houses since 2003 and has an A+ better business bureau rating. We can give you an all cash offer in less than 7 minutes and schedule a time to see your house in person.