How to Finance a Major Remodel

by James on January 11, 2016 · 0 comments

tool-384740_640Remodeling a home is a major project that should be carefully considered before you decide to undertake it. The purpose for the remodel is also a major factor. If you are remodeling just for your own increased enjoyment, that is a different proposition than if you are doing the remodel to increase the value for a quick resale.

Even if you are just remodeling the bathroom, the Angie’s List average puts it around the $20,000 mark. If you also want to do the kitchen, be prepared to add another $20,000 – $30,000 to the amount. Kitchens and bathrooms are the rooms homeowners are most interesting in remodeling.

But at some point, you might decide that you want to enlarge the dining room, or create a more appealing bedroom. Let’s not even talk about family rooms and home offices. The point is that remodeling is a major expense. Here are three ways to cover that expense:

Get a Specialty Loan

There are a number of loan programs that are designed for specific categories of people in certain circumstances. It is worth looking into if you happen to be one of the following:

  • Veteran
  • Disabled
  • Native American
  • A charitable organization

Low VA Rates is just an example of one such program designed to help people who fall into a particular group. The government offers a number of home-related programs to veterans. And various companies compete for the business of veterans as a result of the programs. Ultimately, it means that people who normally would not be able to get that kind of project financed, have an avenue of funding that is available for the asking.

Get a Home Equity Loan

According to the FTC, home equity is:

… the difference between what your home could sell for and what you owe on the mortgage — as a way to cover the costs

In other words, a home equity loan is money you borrow against the profit the lender thinks you will make if you sell your home today. Borrowing against that profit is a great way to raise funds for improving the property. This is especially true if you are borrowing the money for the purpose of putting the house on the market for resale.

It is vital that you select the improvements that will get the best return on investment. Among those profitable improvements are:

  • Deck additions
  • New siding
  • New front door
  • New windows
  • Minor kitchen and bathroom work

There are lots of improvements you might like, but sometimes do more harm than good to the resale value, like swimming pools. Home equity is something you collect over time. Curated properly, it can be a goldmine when it is time to sell.

Turn part of It into a Rental

One of the most direct ways to bring in money form a home improvement is to turn a portion of the home into a rental. That basement you are not using for anything could be worth an extra $1,000 per month toward renovating the kitchen that you use everyday.

There are plenty of people who would be happy to rent a portion of a well-kept house. College students are prime candidates. Newly weds just starting out can also be excellent renters.

Home improvement projects can quickly get out of hand and consume your budget. There are always alternatives to major remodeling projects. But if you find that you need to take one on, there is special financing, home equity loans, and collecting rent from a portion of the house to help you cover the expense.

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