Financing Options Community banks offer a wide variety of loan programs designed to help you obtain funds for improving your home. Consider these three steps: Step 1: Calculate the costs of your improvements From start to finish, estimate the total cost of the project. Step 2: Set a Budget Be realistic about how much you can afford to improve your home before making a final decision. Step 3: Get Financing Explore all of your options before selecting the most suitable financing option. The cardinal rule for financing home improvements is to match the loan type to the home's remodeled value. The idea is to leverage the payback value. Projects with a low payback value should be paid off prior to selling your home. Long-term financing is best for projects that offer a sizeable return on your home improvement investment. Click here for a list of short and long-term financing options. | Option | How It Works | Best Use | | Cash-out refinance | Refinance your first mortgage and convert your home's equity into cash | Suitable for long-term projects requiring a one-time sum of money. This option is most cost-effective if you intend to live in your home for extended period of time. | | Home Equity | Apply for a conventional second mortgage, a home equity loan or a home equity line of credit. | Second mortgages and home equity loans are suitable for big projects requiring a one-time sum of money, whereas home equity lines of credit are best for shorter projects typically requiring or projects requiring gradual payments. | | Cash | Use your own money to finance your project. | Suitable for most all projects. Getting financing for large projects may be a more desirable option, however. |
Six Decision-Making Steps Before jumping enthusiastically into renovating your home, you may want to give some thought to a number of preliminary considerations. Here is a list of steps you might want to follow before any work begins. Step 1: Determine the types of improvements you want to make on your home, and the scope of the project. Step 2: Arrange a list of desired improvements and rank them from the least important to most important. This will help you determine an appropriate loan amount when applying for a home improvement loan. Click here for quick guide on what improvements may be necessary. Step 3: Consider your long-term goals for your home, and the length of time you expect to reside there. This will help you to determine whether your renovation project is worth your time and money. Step 4: Calculate the value of the improvements you intend to make to your home. Will enlarging a kitchen, modernizing a bathroom, or building a second story allow you to get a better price for your house? Click here for an explanation of what improvements typically pay back your investment. You may want to consider getting a loan based on your home's value after improvements are made. Step 5: Talk with several contractors about the costs and timetables associated with your project. Step 6: Determine whether your project requires a home improvement loan. While most cosmetic changes will not, structural and mechanical changes typically require some kind of financing.
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