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Show Me the Money!

Unless you’re on an HGTV show–and maybe even if you ARE on an HGTV show–you need to pay for your remodel somehow.  Although there are many financing options, there are two most commonly used in remodels. You should be aware of both of these before you start applying for financing.

Home Equity Loans. This type of loan lets you borrow against the equity you’ve already built up on your property. They’re for a specific amount of money (typically not exceeding 80 percent of your home’s value) and you pay it back over time in equal installments over a fixed term, just like your existing monthly mortgage payment. These loans are often the most affordable option because you can spread the burden of repaying the loan over time.

Home Equity Line of Credit (HELOC). HELOCs allow you to tap into a line of credit like you would a credit card. You only draw out what you need when you need it, only paying back what you actually use.

Which is better for your project? That’s a great question with no easy answer. When making a choice, consider other circumstances, such as your post-remodel financial needs. HELOCs can provide flexibility after renovations are complete because you can tap into them afterwards to cover other expenses.  Even if you can pay for your remodel out of pocket, talk to your accountant or investment advisor to see whether tax and asset appreciation repercussions make one choice better for your bottom line.

Financing is a very important aspect of your project and you may often be eligible for rebates or other incentives that will lower overall cost. I have more information on this in my book, Remodel Success.