How to finance your home renovations

May 24, 2016


If you’re planning an addition or remodel, you’re not alone. Americans spend around $300 billion annually on renovations, according to the National Association of the Remodeling Industry.


And while some consumers may write a check for their $65,000 kitchen remodel, you wouldn’t be reading this post if that were your situation. So here are pros and cons of different finance options, whether you already own a home or want to buy a property that needs work.


Credit cards


You get a “zero interest for 18 months” offer in the mail with a credit limit high enough to pay for your whole project. Before you sign up and charge thousands of dollars, make sure you understand exactly what the terms and penalties are. At the end of those 18 months, you may start owing 15 or 16 percent on any remaining balance. If you can pay off the amount before the introductory period ends, such an offer may work. But with interest rates so low, it’s a high-risk option without much reward.


Home equity products


Like your original mortgage loan, a home equity loan gives you one sum that you pay off over time. The term is usually shorter than your original loan — five to 15 years versus the typical 30 years — but the interest rate is fixed, resulting in the same steady, monthly payments that you’re already used to.


A home equity line of credit is like a credit card. You borrow what you need, when you need it, up to a certain amount during the time period set by the lender. This offers you more flexibility than a fixed-rate home equity loan.


Home equity loans hold few surprises, but lines of credit often have variable interest rates, and the payments will vary depending on the interest rate and how much credit you’ve used. And when the line of credit expires, you must pay off the balance.


Home renovation loans


If you’re buying a fixer-upper, consider a 203k loan from the Federal Housing Administration.  This type of mortgage allows you to borrow funds for renovation costs as part of your mortgage, so you have one loan and one closing. You can use a 203k loan whether you want to take a place down to the studs or just add new countertops.


Whenever you want to borrow money, it’s best to contact a lender to walk you through your options. The methods listed above aren’t the only ways to finance your renovations, and your lender will be able to recommend one that best fits your situation.


Please reload

Featured Posts

How to finance your home renovations

May 24, 2016

Please reload

Recent Posts
Please reload

Please reload

Search By Tags
Please reload

Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
  • Black Facebook Icon
  • Black Twitter Icon
  • Black LinkedIn Icon

© 2020 Primary Residential Mortgage, Inc. | 979.221.6682
14550 Torrey Chase Blvd, Suite 465, Houston, TX 77014
NMLS# 1161933

PRMI NMLS: 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas.Department of Financial Institutions CL-3094.