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Financing a Home Renovation in an Economic Downturn

How to Finance a Home Renovation in an Economic Downturn

Remodeling your home in a recession might feel impossible, but it doesn’t have to be. Whether you experienced some unexpected damage or you can’t put off remodeling that old bathroom any longer, here is how you can responsibly plan on paying for home renovation without taking on massive amounts of debt.

Ways you can finance your home renovation

Here are some tips to try out when you’re figuring out how to pay for your upcoming home improvements.

Focus on inexpensive renovations first

When starting home improvements, you don’t have to do everything at once. Many different renovations can be expensive and also take a great deal of time.

The first thing you might want to do before beginning any projects is to make a list of the renovations your home needs. Then, start focusing on the less expensive, smaller jobs that can be done quickly and without much expense or effort. You will be pleasantly surprised how much even the little projects can change up your home. Painting, landscaping work, and replacing small things like hardware in a kitchen or bathroom are all great ways to start with inexpensive renovations and begin updating your home.

Start with money you already have saved

Many homeowners make the mistake of trying to do multiple large, expensive projects one after another. To avoid excessive payments or getting yourself into unwanted debt, start your home renovations with the money you already have saved. Figure out what projects you currently have the money for and plan how to responsibly pay for them. For example, maybe you can afford to replace the countertop on the island in your kitchen right now. Then, you can work on the next aspect of improving your kitchen when you’re financially comfortable again.

Look for deals on appliances and hardware

You don’t always have to buy your appliances from big, name-brand stores. When looking to buy new appliances or hardware for your home, make sure to check out some of your town’s local stores to see what they have to offer. If you’re lucky enough to have a home liquidation store in your area, you might be able to find great deals on appliances that were overstocked or slightly used. Finding deals on appliances and hardware can make a massive difference in your overall renovation payments.

Know the value of your home

Before deciding if you want to dive into the world of personal and private loans, it’s important to know the value of your home. If it has been a while since you’ve had your home inspected or appraised, you should do that before you begin any renovations or improvements. You want to understand the costs of your renovations in terms of the overall value of your home so that you don’t spend excessively. You can also take that home value and estimate how much it can increase if you do certain renovations and upgrades.

Get a home equity line of credit

Home equity lines of credit, or HELOC, are becoming an increasingly popular option for homeowners looking to renovate if their home has enough equity. These funds are a great choice because the payments are low, and they operate similarly to any other form of credit you may have. However, it’s important to keep in mind that payments are low because they are interest only. This means to pay off the loan in the time you’re given, you should be paying more than the designated interest each month.

Get a construction loan

Many homeowners can do renovations by getting construction loans. These loans can come in a variety of forms and be given by different organizations, but they are based on the estimated higher value your home would have after getting these renovations done. These loans can be a bit more difficult to get, as they are distributed by your contractor under regulated terms and conditions. The payments can also be much higher than home equity lines of credit.

Refinance your mortgage

While refinancing your mortgage may sound like a big step to take, it can provide you with the funds necessary to do some home improvements. Because your mortgage is a loan already, you can refinance it in a way that is more beneficial to you. One common method of financing is called a cash-out refinance. This dips into the equity of your home to provide you with funds, making your new overall mortgage payment higher to pay off the money borrowed. When interest rates are low, cash-out refinances tend to be a popular option for homeowners.