Whether you are renovating a bedroom or adding a patio deck, you are going to have to plan for the costs associated with the renovation. When planning a home renovation project, it is important to choose the right home financing plan that meets your needs.
Choosing the right home financing plan depends on the length of the project and how much you can afford to pay for the project, When you take on longer repayment terms, you will have to pay more because of the interest rates, however your monthly repayment fee will be lower. By determining the length and costs of the project first, you will have an easier time choosing one of the following home improvement finance plans:
1. Unsecured Loan: Often referred to as a personal loan, an unsecured loan is a loan that is not secured against your property, but against your credit rating. This type of loan is usually taken out for smaller projects. You can obtain a personal loan from a bank or lender. .The interest rates usually vary according to market conditions.
2. Secured loan: A secured loan is a loan that uses the assets of the borrower to ensure repayment of the loan. When you borrow money against your house or vehicle, the lender is guaranteed to retrieve its money if you fail to make the repayments.
3. Home Improvement Mortgage Refinance: Refinancing your mortgage at a fixed rate allows you to use extra money for your renovation project. The repayment schedule is usually for 20 or 30 years, or the term of your mortgage
4. Home Equity Loans: A home equity loan involves borrowing against the equity in your home. You can receive a lump sum to pay for your renovation project. Obtaining a fixed rate will make repaying the loan much easier. If you fail to make your payments, you are at risk of losing your home.
5. Home Equity Line of Credit: This type of loan works by giving you an open line of credit. This type of loan does not usually have a fixed rate so interest rates depend on market conditions. This type of loan is good for ‘pay as you go’ renovation projects.
6. Bank Loans: Bank loans are usually taken out for small renovation projects as they have to be repaid within a few years. Make sure you check to see if you have a fixed rate loan so you will not be dependant on fluctuations in the market.
The following is a list of tips to help you obtain the best home improvement financing plan:
Know Your Final Costs: Before seeking home improvement financing, add up all the costs associated with the renovation project. Make sure you allow for unexpected costs.
Affordability: Make sure you can afford the repayments. Make a list of monthly expenses including your mortgage to make sure you have enough money to repay the loan. Determine the amount you can actually pay each month.
Compare Financing Plans. Don’t settle on the first renovation financing plan. Check with three or four different lenders to see if you can get a better deal. It pays to shop around.
Find a Reputable Lender: Make sure you obtain a loan from a lender that is known for its fair rates and honesty. Read the fine print for any home improvement financing plan. Make sure you know if you have a fixed or variable interest rate.
Because home improvement projects vary from person to person, there are many types of home improvement plans available. To acquire the best home improvement loan, it is important to do your research. No one wants to mistakenly add debt from a project that was supposed to add value to a home.