Owning a home is a major responsibility and often requires upgrades or improvements. Aside from getting the space where you can be comfortable, renovations and home improvements also help you to stay competitive in the housing market. Doing this can be beneficial if you plan to sell your home.
However, there’s no denying that it can be challenging and expensive to finance those upgrades. So, how can you finance your home upgrades?
You might have your savings to draw from or take out a loan, but there are many other options you might want to consider. Here are seven creative ways to finance your home upgrades:
1. Loans
One of the most common ways to finance home upgrades is by taking out a loan. Loans can come from banks, credit unions, and other lenders, allowing you to borrow money for renovations without using your savings. Loans typically have a fixed interest rate, which will remain the same for the duration of the loan.
One common type of loan is a social security loan. This loan can be used to cover home renovations and other expenses and can often come with lower interest rates than traditional bank loans. You’ll need to have social security income to qualify.
Moreover, make sure you’re aware of the repayment terms before taking out such a loan. If you’re unable to make your payments, it could damage your credit score and put your home at risk.
2. Home Equity Line of Credit (HELOC)
A HELOC is a great way to borrow against the equity in your home while still maintaining ownership. It can be used for remodelling, debt consolidation, and more. Best of all, the interest you pay on a HELOC is tax deductible, making it an attractive option for home upgrades.
HELOCs typically have adjustable interest rates, so the amount you pay will fluctuate depending on the market. Before taking out a HELOC, it’s essential to understand how these interest rates work and whether you can afford them over the long term. That way, you won’t be caught off guard by any unexpected payment changes. And be sure to shop around to find the best rates and save as much money as possible.
3. Cash-out Refinancing
If you qualify for a cash-out refinance, this can be a great way to finance home improvements. This type of loan is usually taken out at a much lower interest rate than other types of loans, making it an attractive option if you qualify.
A cash-out refinance replaces your current mortgage loan with a new one and gives you the difference in cash you can use for home upgrades. The downside is that it takes time to close on these loans, so be sure to plan before taking out a cash-out refinance. If you’re in a hurry to start your home upgrades, this might not be the best option. But if you have the time, it can be a great way to finance your upgrades.
4. Government Grants and Programs
Many state and local governments offer grants and programs to help homeowners pay for home improvements. These can range from energy-efficient upgrades to down payment assistance, so it’s worth checking out what your state or municipality offers.
These grants and programs often have specific requirements and qualifications to be met to receive funding, so be sure to research before applying. You may also need proof of income, so ensure you have all the necessary documents ready before applying.
Note that even if you qualify, the funds may not be available right away. You may have to wait a few months or more before receiving the money. So, it’s best to plan ahead and apply as soon as possible.
5. Tax Credits
Certain home improvements can qualify for tax credits, which can help offset the cost of your upgrades. These credits typically depend on the type of improvement you’re making and how energy-efficient it is.
For example, the US federal government offers a tax credit for homeowners who install energy-efficient windows, doors, or roofs. So, if you’re making these upgrades to your home, check out what tax credits are available. That way, you can save some money while making your home more energy-efficient.
Also, be sure to consult a tax professional before claiming any credits, as they can help you get the most out of your home improvements.
6. Homeowner Insurance
Many homeowners’ insurance policies offer discounts for making specific home improvements, such as adding a security system or installing new windows. These discounts can help reduce your monthly premiums and save you money in the long run.
Before committing to an upgrade, always check with your insurance provider to see if they offer any discounts for that particular improvement. Doing so will help you save money and ensure that your home is properly protected in the event of any unexpected damage. And be sure to shop around for the best rates before committing to any policy.
7. Financing Through Your Contractor
Many contractors offer financing options to their customers. It could be in the form of installment payments or special financing with extended payment plans. Be sure to shop around for the best deal and read the fine print before signing any documents.
Some contractors may also offer discounts for paying in full upfront. It can be a great option if you have the funds available and don’t want to worry about making monthly payments. And you may get a better deal than a loan or credit card.
But make sure to research the contractor before signing any contracts, as you don’t want to get stuck with a shady one who offers subpar services. And keep in mind that financing through a contractor may not be the cheapest option in the long run.
Final Thoughts
No matter which home improvement financing option you choose, it’s important to shop around and compare rates. That way, you can find the best deal for your financial situation. Don’t forget that most loans also come with fixed interest rates, so it’s essential to understand how these will affect your payments over time. With a bit of research and due diligence, you’ll be able to find the right financing for your home improvements.
