No matter how great a home looks when you first purchase it, after a while, it will need remodeling. Whether you’re a homeowner or property manager, keeping the interior design of your home up to date is key to maintaining your house’s market value.
Renovating the interior of a house is a costly endeavor, but it’s an investment into your investment after all. Your home is always a viable source of cash, so you have to treat it like the investment it is and keep it in prime condition whether for sale or your family’s comfort and enjoyment. A lot of people break their bank on home improvements but are usually unaware of all the financial options they have at hand. Continue reading to get some tips to help you finance your interior renovations.
Get a second mortgage.
One of the more common “dad jokes” in America is, “I’m going to have to take out a second mortgage to pay for that.” While it falls into the category of unfunny things dads say, especially when they’re talking about a pair of shoes or a video game, that corny one-liner hints at an important truth: You can use your house to pay for things like new fixtures or appliances.
If you’ve been living in your home for a while and have enough equity in your home, you can use it as collateral to secure a loan for the new kitchen of your dreams and all its state-of-the-art appliances. There are two types of second mortgages you can get on your current home loan—home equity loans and home equity lines of credit (HELOC)—and they’ll be covered in the following sections.
What is a home equity loan?
Equity loans are loans based on the amount of equity you have in your home. In other words, you’re borrowing the equity in your home, and as you pay it back, you regain your equity. It’s important to work on your credit score before trying to secure a loan because lenders use it to determine your eligibility and interest rate. Being that you’ve gone through the home loan process before, you know that the higher your credit score is, the lower your interest rate will be.
What is a HELOC?
Equity loans and HELOCs are very similar, but one of the main differences is that you can that HELOCs allow you to tap into your equity as a line of credit whenever you need it, whereas an equity loan is one lump sum. Another difference between the two is that HELOCs don’t have fixed interest rates or monthly payments the way equity loans do. You should talk to different lenders to see which option is best for your home project.
Property investors often use hard money loans to get quick cash for renovations.
If you’re a property owner trying to get a house ready for prospective buyers or renters, you probably don’t have time to go through the process of getting a conventional loan. That’s why many property investors and real estate brokers use hard money loans when they need money to finish a project that should earn them capital soon.
A hard money loan is a financial option that allows you to use a property as collateral to pay for renovations on or the purchase of another property. Hard money loans are short-term loans, but they’re perfect when you want to grace your home with the most elegant kitchen design in Denver because you have a prospective buyer on the hook.
Paying for a bathroom or kitchen remodel can put a significant dent in your bank account, but the good news is that you have multiple financing options to choose from. Take your time and do your due diligence to find the home improvement financing option that’s best for your needs and your budget.