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Home Improvement Loans - Remodeling Using Financing

Oct 10, 2007
Remodeling your home can be costly! From a few hundred dollars to repaint a room to $20-50,000 to remodel a bathroom or kitchen, few people can afford to use their savings alone to pay for hefty remodeling costs. So, what are the best ways to finance large-scale projects?

It is estimated that most homeowners prefer unsecured financing for smaller projects costing less than $20,000, but larger projects may require a trip to your local lender. The most common forms of financing for most projects include savings; IRA deductions; fixed home mortgages and home equity lines of credit and credit cards.

For some homeowners, tapping into financing options offered by certain manufacturers is an excellent option to taking out a home improvement loan at the bank. From windows, carpets, siding, roofing and more, manufacturers often offer their own financing to allow more homeowners to use their services and/or products. Just keep in mind that many f these programs feature heftier interest rates than are available elsewhere, but may be much easier to obtain for homeowners with past credit issues. This is an especially good option for large-scale projects that may require both a home equity loan and manufacturer financing in order to complete even more work or use better quality (and more expensive) materials.

Credit cards are another option for some smaller projects, but are generally not considered the most financially savvy way to finance any project that costs more than a few hundred dollars.

If the options listed above aren't right for you and your project, the best options may include bank or mortgage financing. When interest rates decline dramatically, many homeowners opt to refinance their existing mortgage (and thus taking out enough extra to cover their remodeling costs), into a new lower-rate fixed mortgage. This can be an excellent way to both lower your current payments, and pay for that expensive remodeling project.

Separate fixed loans (often referred to as a second mortgage), are also an option, allowing you to use your home as collateral for the loan without changing your existing mortgage.

Home equity lines of credit have become increasingly popular in recent years as property values escalate, leaving homeowners with enough equity in their property to cover the costs of the loan. This is an especially good option for smaller loans that can be repaid in five years or less, and allow the homeowner to pay minimal interest payments only when in a financial pinch. These loans are not a good choice for long term financing, however, since payments can rise dramatically if interest rates go up, leaving many homeowners unable to make even the interest payments, not to mention principal payments.

Regardless of how you choose to pay for that expensive remodeling project, keep in mind that your options are plentiful; making it easier than ever to do all of the projects you've been dreaming about.
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