Whether you’ve always wanted a bigger deck for summer barbecues (a $3,600 to $8,400 project), have always hated that pink tub and tile in your master bathroom (at $5,578 to $15,138), or discovered a leak in your basement and need a total overhaul (for $22,000 to $46,000), there are plenty of reasons (fun and not-so-fun) to renovate your home. The question is, how do you afford it? Here are the five top ways most people fund their renovation projects.
- Empty your piggybank
The first place most people look when it comes to making a big purchase or financing a large expense is at home: Their savings and checking account balances. If you’ve been planning the renovation for a while and saving up over time or have ample disposable income, this may be a simple solution for you. However, if you’re one of the 69 percent of Americans who have less than $1,000 in savings, your piggybank may not get you very far.
- Charge it
If you’re responsible with your credit card payments and are able to secure a high limit and 0 percent introductory rate, using a credit card for your renovation may be a good idea. However, it’s important to remember the magic word: Interest. If you’re not prepared once the introductory rate ends and you’re looking at up to $46,000 in charges for that new basement, you can find yourself in dire financial straits.
- Borrow from friends or family
This one is tricky. Even if you’re fortunate enough to have friends or family who are in a position to help you finance your project (and willing to do so), you still need to proceed with caution. Owing a friend or family member money can quickly affect the relationship if proper guidelines and agreements aren’t made up-front. That’s why you should draft and have notarized the terms of your loan, including length of time to pay back, whether in one lump sum or regular payments, and any interest rates (yes, they may charge them too).
- Borrow from a lender
Another route some people take is a personal loan from a bank or credit union. Personal loans may be good for smaller projects, like that expanded deck or minor bathroom remodel. They’re unsecured, which means you don’t need to provide any collateral. But because they’re unsecured, their rates are based on your personal credit score – and are typically higher than you’d pay with a secured option like a home equity line or loan. Many personal loans also carry fees, including origination and prepayment fees. It’s important to do all of your homework and check your credit score before proceeding with a personal loan.
- Put your home to work
A home equity line of credit (HELOC) is a great way to fund your home renovation project. Rather than taking out a personal loan, you use the equity you’ve built up in your home, i.e., the amount of your home you’ve already paid off against your home’s value. Just remember to look for the most favorable terms, like Suffolk Federal’s HELOC, which features repayment periods up to 20 years, low rates, no closing costs, and a high borrowing limit of $500,000. By putting that money back into your home, your home’s value may increase well past the cost of the project for a great return on your investment. The best part? Since this is a line of credit, you can use the funds you didn’t need for your renovation for virtually anything else, like a vacation, college tuition, or new car!
So now you understand your options when it comes to financing your home renovation, have you decided a HELOC is right for your situation? Then it’s time to choose the financial partner who can help you put your home’s equity to work for you: Suffolk Federal. Learn more and apply for your HELOC now.