How to Finance Your Home Renovations ? Dip Into Savings Or ...

The reasons for

undertaking home renovations are varied. Many home owners want to modernize or update the look of their homes for their own comfort and enjoyment. Some, rightly, view their home as an investment and want to increase the resale value of their home should they decide to sell. In today?s environmentally-conscious times, many homeowners are now undertaking home renovations to increase the energy efficiency of a house. Their investment in home renovations converts into a smaller ?carbon-footprint? and long-term savings in energy consumption and costs.

Whatever the reason, home owners planning home renovations should consider both their costs and their financing options before beginning their project.

Financing Options for Home Renovations

As with any investment, the financing option you choose depends on the size of the project and your current financial situation. Financing options can range from dipping into your pocket or savings and paying cash for smaller projects examined as painting and wallpapering, to tapping into a line of credit, taking out a line of credit or even refinancing a mortgage for larger renovations that can range from bathroom . do-overs to adding additions to existing homes

Here are some of the more common options for financing home renovations, both large and small:

Financing Minor Home Renovations

Self-Financing ? This option makes sense for smaller projects. It is therefore a feasible option for do-it-yourselfers plan on a pay-as-you-go (or pay-as-you-build)

Credit Cards -. Large charging expenses to a credit card is not an option, but not necessarily a good one. With their higher interest rates, credit cards have limited value in home renovation projects, and can be damaging to your financial health if there are unexpected cost overruns. (A do-it-yourself installation of a tub surround in your bathroom can not turn expensive if your plumbing skills are as honed as you would have liked them to be and you notice water dripping through your living room ceiling!)

Loans and Lines of Credit ? These are popular options that offer lower interest rates than those charged for Substantially credit cards, but often higher than those of home equity loans. One Disadvantage of personal loans is that once they are repaid you need to reapply to obtain more funding. Lines of credit are ongoing, up to the credit limit, so there is no need to reapply if you need more funds. (A line of credit with room on it above and beyond the cost or the renovation will come in handy on a plumbing job gone bad -. See above)

Financing Major Home Renovations

Home Equity Loans ? These loans allow you to leverage the equity in your home. They are often used to fund major renovations because they offer the needed capital at a much lower interest rate than credit cards or other types of loans. Typically a home equity loan, Which can be structured as a line of credit secured against your home?s existing equity, is limited to 80% of your home?s value, but a mortgage broker can often work for you to secure loans of up to 95% of your home?s value. . With home equity loans, there may be some setup costs, but like lines of credit, there is room to allow for cost overruns and unexpected expenses

Mortgage Refinancing ? If you are planning major renovations, like adding to addition or in-law suite, it may pay to refinance your mortgage. With this option you can spread the payments out over a longer period and enjoy mortgage rates that are normally much lower than those of credit cards, lines of credit or personal loans. As with home equity loans, there may be some initial fees to refinance

New Purchases -. If you are buying a new home that has already been built or is a resale, and know that you want to make improvements it will probably make sense to include anticipated renovation costs into your mortgage. A mortgage broker can help you shop around for the most rate for luxurious. If you are having your home built a mortgage broker can work with you to find a construction loan that fits your anticipated building schedule. You do not want to be borrowing and paying interest on the entire project up front. A construction loan that Allows you to draw down the cash that is need for each phase of your home?s construction as it is needed will have significant cost savings over the time it takes to build your dream home

Other Tips for Financing Home Renovations

Unfortunately, cost overruns are common with home renovations. When budgeting for your home renovation, be sure to leave a contingency fund for unforeseen overruns or other expenses. And as the project proceeds, you may discover that you want to add new items to the renovation, so having a little extra cash on hand is a good idea.

Consult the Experts When Financing Home Renovations Always plan ahead and

try to be accurate about the costs of your home renovations. If you are making major changes, a mortgage broker can help you decide on Which home equity options are best for you.

id=?article-resource?> For more information on financing your home renovation project ? Whether through a home equity loan or one of The other financing methods outlined above, visit http://www.canadianmortgagesinc.ca to consult with a qualified mortgage broker who . can help you find the home equity loan, secured line of credit, construction loan or mortgage refinancing product that will help you complete your home renovations on time and under budget

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Source: http://www.lovefinanceinfo.com/2012/08/how-to-finance-your-home-renovations-dip-into-savings-or-whether-to-secure-a-home-equity-loan/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-finance-your-home-renovations-dip-into-savings-or-whether-to-secure-a-home-equity-loan

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