It’s time for an extensive renovation project. You have all the plans in place. You’re finally going to remodel your kitchen or master bath. These considerable home improvement projects can transform your home from boring to absolutely amazing.
But how are you going to pay for your New Jersey home remodel?
A kitchen or bathroom remodel can be one of the most significant investments you can make in your home. Going with luxury brands like Kohler for bathroom fixtures and Andersen Windows cost more money initially but pay off in the long run.
How do you make the decision on whether to invest in luxury vinyl plank flooring or high-end appliances or when to make a compromise? First, understand your financing options. And then, you can decide on a budget for your New Jersey home remodel.
Understanding Your Finances and the Value of Your Project
Before deciding how you will pay for your home remodel, homeowners will need to figure out how much the project will cost. Home renovation costs can vary.
For example, a whole home renovation can cost up to $200,000. The average bathroom remodel costs $20,000 to $40,000. And a kitchen remodel can cost $135,000.
If you are planning a home remodel, break down which areas of the house need updating and how much your renovation will cost. Then you can look into the financing options.
Paying from Savings
One way of financing a home renovation is with cash. You can work to save up for your home remodel. This takes careful planning but is a sensible way to fix up your home without going into debt.
Waiting to fix up your home takes a lot of patience, especially if the home’s current living condition is less than ideal. But it is always worth it to pay for renovations in cash if you can.
Personal Loans
Another route to paying for a home remodel is through personal loans. Meet with your bank to look over your personal finance to determine if you qualify for a personal loan.
Often personal loans are approved for up to $10,000. Or you can borrow money from a friend or family member. The good thing about personal loans is that if you default, your home is not up for collateral. This means you will not risk losing your home.
Home Equity Lines of Credit
Another way to borrow money for your New Jersey home remodel is to use a home equity line of credit. This is only possible if you have equity in your home.
When you first take out a home loan, you pay a mortgage based on the home’s selling price. After the sale goes through, the house can grow in value, which is called home appreciation. As the home increases in value, your equity in the home increases.
Home equity lines access the equity value, and you are able to borrow that money to put it back into the house. When you use a home equity line of credit, you can not use more than the home’s equity value.
Many times, the interest that accumulates on your line of credit is tax-deductible. And since the money is borrowed from the value of the house, if you cannot pay the loan, the house is collateral.
You may have to sell the house or lose the house if you default on the loan. The line of credit is available because the bank knows you have the value in the house to back it up. Of course, you can always pay off a home equity line of credit without selling your house.
Home Equity Loans
Home equity loans are different from lines of credit because they have fixed interest rates and monthly payments. While the interest rates change while accessing your home equity line of credit, you can take out 85% of your home’s value in a loan that you will pay back in 15 years on fixed monthly payments.
Once again, your house is collateral for a home equity loan. The bank will trust that you are good for the loan because they know you have value in your house.
Using a Credit Card
If you do not have equity in your home to borrow, you can use a credit card to pay for a home remodel. Charging your credit card and paying it off each month can help your credit score. And if you calculate the amount that you need and how quickly you can pay it off, credit cards might be the best way to go.
If the amount is too large to charge onto a credit card with higher interest rates, other loans might cost you less. Weigh the benefits against the negatives to find out if you can make your NJ home remodel work using a credit card.
Other Financing Options
You always have the option for a cash-out refinance. Keep in mind that you will have closing cost fees if you were to refinance your home. But you can essentially evaluate what your home would sell for right now, rolling it into a 30-year loan and taking out the excess money in cash.
The government also offers home improvement loans that come with stipulations. For example, if you were to take out a Title I Home Improvement Loan, you would have to prove that the money was spent on making the home more liveable.
Structural repairs will qualify for the loan, but luxury add-ons, such as a swimming pool, do not..
Magnolia Home Remodeling Group Can Help Finance Your Dream Home Remodel
At Magnolia Home Remodeling Group, we can offer you a trusted contractor to take care of your home remodel. New Jersey homeowners never have to worry about whether the construction will be done correctly or completed on time. Instead, we can ease your worries and deliver a project worth boasting about.
Get started on your New Jersey home remodel project to make your house the dream home you always imagined it to be. Contact us today to get started.
