Have you been living in a home for decades? Do you want to customize your home to fit your style and preference?
If yes, you should know that any home improvement project comes with a daunting component that often revolves around money. Therefore, the most integral step toward the completion of a home improvement project is determining how to pay for it.
If you are wondering how to finance your home improvement projects, you are not alone. Almost 50% of homeowners struggle with how to pay for home improvement projects. Fortunately, there are several ways to finance a home remodeling project in Portland, Maine, and that’s what we discuss in this post.
Below are four financing options for home remodeling so you can figure out which one will work best for you.
#1. Home Remodeling or Repair Loan
One of the most common ways for remodeling funding in Portland, Maine, is a home remodeling or repair loan, which is an unsecured personal loan that is offered by conventional lenders such as banks, credit unions and online lenders.
Since the loan is unsecured, you don’t have to use your property as collateral to qualify for the loan. However, your ability to qualify for the loan and the interest rate on it will heavily depend on your credit score. Another important aspect of a home remodeling loan is that the funding comes in relatively quickly. Once your loan is approved, you can access the funds in as little as a day. Moreover, home remodeling loans typically have a shorter repayment schedule and a lower loan amount compared to other types of equity loans, including HELOCs.
#2. Home Equity Line of Credit (HELOC)
If you need access to a more significant amount of funds, it’s best to go for secured loans such as the Home Equity Line of Credit (HELOC). HELOC is a secured loan, which means that your home backs the loan amount. Given that it’s a secured loan, you can enjoy lower interest rates than unsecured loans.
Moreover, a HELOC also allows you to take the amount that you need depending upon your borrowing limit (revolving credit) whenever you need it for your home improvement project.
However, since your property is used as collateral, your property could be foreclosed if you don’t make payments on time. Moreover, the interest rates on HELOCs are variable, which means your interest payments may increase in case of any changes in the market conditions.
An integral aspect of using HELOC is that you should have at least 15-20% of the equity in your home before you consider it.
#3. Cash-Out Refinance
A cash-out refinance also makes a great choice for remodeling funding in Portland, Maine. The financing option allows you to replace your existing mortgage with a new and larger loan. Since you have excess money (the excess cash between your old mortgage and new loan), you can use the extra cash to finance home improvement projects.
While it seems like a lucrative option, there are a few drawbacks that you should know. Cash-out refinance requires you to pay for an appraisal, closing-related costs, taxes, and other fees. Moreover, if you are not refinancing your mortgage for a shorter term, you will eventually be extending the life of your loan, which means it will take you longer to repay the entire loan.
#4. Credit Cards
For minor upgrades in your home, you can also use your credit card as a means to finance home improvement. The most obvious benefit that you will enjoy with this financing option is that some credit cards offer interest-free repayment for the first few months.
Moreover, credit cards often come with several rewards, so you might end up earning cashback or other rewards if you spend using your credit card.
However, if you are unable to pay back your balance within the interest-free time allowed, you may have to make higher interest payments.
The Bottom Line
Funding renovation in Portland, Maine, requires a lot of consideration, and you should evaluate all your possible options before you choose one for financing your home improvement project. When evaluating different loan options, it’s best to get in touch with multiple lenders to get the best terms.
Dismayed to learn how much a fixer-upper costs to fix up? Don’t worry – we are here to help! Call Bridgepoint Capital today at 207-281-3842 to start a discussion about your funding your project today.