So many projects… and there are also many ways to finance a home makeover and remodel.
There are a couple important questions to ask with regards to funding, when determining if you should tackle a remodel project: How much will it cost, and how long do I want to pay for it? Answering those questions will make it easier to choose between a home equity line, cash-out refinancing and using credit cards. If what you are going to finance can be paid off in a year or two, then credit cards, or other simple financing solutions make sense. Can you pay this short term financing off quickly with a tax refund or other source? If it will take you 5, 10, 15 years to pay it off, then a home equity or full refinance will make more sense. Once you determine this, then you can decide what option is best."
Financing can be short to long term. Within your desired time-frame, there are several choices, each with their own advantages and drawbacks. Choosing between financing methods is generally easy, as long as you have equity in your home. Credit strength and time also play a part.
There are no hard and fast rules of thumb. It takes an honest assessment of one's financial situation, not some fancy formula. Borrowing a relatively small amount, for instance, can mean different things to different people. You might be better off with short-term or intermediate financing. Short-term financing can include opening a home equity line of credit (HELOC), using cash from savings, a credit card or a home improvement center promotional offer, a construction loan from a bank and/or even a loan from your 401(k) or life insurance policy.
Here is a checklist to consider:
The best thing to do is look for a loan that will cost you the least in interest and allow you to pay it off in as fast a time-frame as comfortably possible, giving preference to tax ‘write-off’ loan options (most loans tied to the property).
Some of the different options as well as pros and cons of each choice are as follows:
1. Home equity loan
2. Home equity line of credit
3. Refinance existing mortgage
4. Construction loan
5. Savings
6. Hybrid savings-equity loan
7. Personal loan or line of credit
8. Credit-card financing
9. Store financing
10. Contractor or private party loans
11. Cash-value life insurance
12. 401(k)
More to come in the next few days about each catagory
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