Depending upon the extent of home renovation that you wish to carry out in order to upgrade your home, you would need varying amounts of finance. On the whole, it is quite expensive to carry out any type of renovation, especially because it is a labor intensive work. Before you think of renovating your home, you should make an estimate of how much it would cost you and how you can arrange for financing the home renovation project.
Common Financing Options
1) Personal Savings: If you are averse to taking any kind of loan, you can start saving money and in a few years time you might be able to save enough to pay for the home renovation work. While this might appear to be a judicious decision, your project of home renovation could get delayed by many years too. Moreover, this delay might push up the cost due to inflation and you would be deprived of staying in your dream home for several years. In case you already have the funds, you should consider the returns that you can get on your money and the need to keep it for emergency situations in your life.
2) Credit cards: This is a very convenient way of arranging for finance but the disadvantage is that it carries a very high rate of interest.
3) Refinancing: You can refinance the mortgage of your home to get finance for the home renovation work if you have sufficient equity. Apart from the availability of the required amount of finance, you would stand to gain considerably if the current interest rates are less than what they were when you had originally taken the mortgage.
4) Home equity: If you have enough equity you can opt for a home equity line of credit for your home renovation. Since this a secured loan, the interest rate will be low and the interest will be tax deductible. You can also take home equity loans which are characterized by fixed interest rates and monthly payments and preset amounts of loan that can be taken only once.
5) Homeowner loans: These loans are available easily and they are sanctioned on the basis of your income, irrespective of the equity that you have. These are secured loans and as such they are tax deductible.
6) Value-added loans: The increased value of your home after the home renovation is done is the criterion for this type of loan which is granted up to a maximum of 80% of the new value of your home after the renovation. The interest rates are very competitive and the payments are released progressively based on the amount of work that has been completed.
Although secured loans offer easy loan terms and interest rates and are tax deductible, you must make sure that you make the repayments on time as per the agreed schedule because failure to do so might mean losing your home.