Best Financing Options For Home Improvements
Homeowners spend an average of $60,400 a year on home renovation projects. Renovations and extensions can be done to get your home how you’ve always wanted it, but sometimes it’s out of necessity, such as the arrival of a baby, an older family member moving in, or carrying out essential maintenance. This means that funding your project may need to depend on loans and credit cards if you don’t have the savings or your savings are for something else. There are many options available, some that will suit you better than others.
Get a loan
There are many different types of loan that all offer various things, which has made them an increasingly attractive option. If you’re 62 or older, you can look into using your home’s equity to fund extensions and renovations. This offers the most flexibility, as the money doesn’t need to be paid back until you sell your home. You may be able to fund smaller projects with short-term personal loans, where you can borrow between $1,000 and $10,000. These tend to have a higher interest than using your home’s equity, but can be good for younger people and anyone who hasn’t yet built up equity.
Use a credit card
The amount of people using a credit card to pay for home improvements and renovations is increasing each year, with one-third of projects funded with them in 2018, according to a survey by Houzz and Synchrony Financial. The biggest reason behind this is that it provides quick access to funds, and some credit cards offer rewards for using them. There’s also the option for low or no interest with promotional cards, which can be appealing. Many people find credit cards to be a good fit for home improvement budgeting: millennials are the most likely age group to use credit cards to fund home projects, with 41% opting for them, but 30% of people over 55 also use them.
Save up for your project
Depending on how big your project is, saving up for it and funding it yourself may be a possible option. Of course, this entirely depends on your financial situation and how quickly you want or need any work done. Saving up to get a new kitchen or bathroom is relatively inexpensive when compared to adding another storey to you home, but can still cost several thousand dollars. Some big companies offer ‘buy now, pay later’ schemes, where you can do your home improvements immediately and have a set time limit – usually a year – to pay it, interest free. If you know you’ll be able to pay off the balance within the time limit, this is a great way to finance your home improvements, but beware that if you don’t pay it off within the set time period, the interest rates are usually a lot higher than financing in other ways, such as with a loan.
Funding home renovations, extensions, improvements and maintenance projects can cost a few hundred to several thousands of dollars. Not everyone has access to savings, and even people who do may prefer to use a loan, credit card or their home’s equity to pay for projects, keeping their savings for a rainy day.