It was reported by Fox Business that Americans are likely to spend a lot more than $ 121 billion on home improvement in 2010, so knowing how to finance home improvement is important. Here are seven of the financing possibilities.
Resource for this article: How to finance your home improvement projects By Personal Money Store
How to finance home improvement – Seven possibilities
Breaking a larger concept down into smaller parts makes it much less daunting; that includes when you are trying to finance home improvement. These are seven steps to solving this riddle.
1. Make use of cash
Fox Business reports that historically, about 65 percent of homeowners who invest in home improvement pay cash for the job. It’s simple and there are not interest fees with which to contend. However, a large cash outlay can certainly make it a lot more difficult to pay other bills if you aren’t careful. Considering that as many as 85 percent of today’s homeowners finance home improvement with cash, even a lot more individuals are budgeting carefully.
2. Use some credit cards
Josh Frank, a senior researcher at the Center for Responsible Lending, reminds that revolving interest can keep you in debt for a while. Even the lowest credit card APRs are about twice the rate of standard home loans and home refinance loans. If you miss a couple of payments, it might even skyrocket to 30 percent or more. If you really need to use a credit card, do not use the card’s cash today feature, as the interest rate for cash till payday via credit card is much higher than the standard credit card APR.
3. Use personal loans
Whether you go to a payday lending, a bank or a credit union, short term loans may be accessible, depending on your relationship with the institution and what your credit score is. In the case of a loan company, nevertheless, having good credit is not required for personal loans . According to Steven Rick of the Credit Union National Association, such personel loans (also known as signature loans) can be either higher or lower in rate than credit cards. It might just pay to shop around.
4. Getting home equity loans
As the housing bubble has burst, standards for home equity loans have increased. You may get up to 90 percent of your current home's value in a fixed rate 10-15 year loan with an excellent credit score. For Business explains that rates could be higher by a point or two than the average home mortgage. Fixed-rate loans make long-term budgeting much easier when you are trying to decide how to finance home improvement projects. Be wary of variable rate loans, as they typically will not go lower and usually will only increase, particularly if you’ve difficulty making payments on time.
5. Trying to use a HELOC
A home equity line of credit (HELOC) sets up an account where the money is there for home improvement if you need it for any reason at all, rather than coming to you in a lump sum similar to a standard home equity loan. Look for a fixed rate, instead of a HELOC with a variable rate.
6. Get an FHA remodeling loan
The Federal Housing Administration (FHA) has a small remodeling loan program – 3,854 loans in 2009, as reported by Fox Business – but if you can get in, you are able to borrow up to $ 25,000 for up to 20 years at a very reasonable rate. Any loan more than $ 7,500 is secured by the home itself.
7. Get contractor financing
Terms will vary wildly here, but if you are able to get a fixed rate, no points loan with no other hidden fees, a contractor loan can cost anywhere from 5 to 11 percent. It will only depend on your credit score and trust of the contractor. Do a little bit of research.
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Fox Business
foxbusiness.com/personal-finance/2010/06/07/compare-home-improvement-financing-choices/
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