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Whether you've been thinking of adding a new room, expanding your kitchen, or finally replacing all your windows, changing your home with a major remodeling project is an exciting prospect. Carrying out improvements on your home will not only improve your quality of life, but will also add value to your property.
But, it may also raise an expensive question: How am I supposed to pay for all this?
If you're like most homeowners, you may not have a lot of extra cash sitting in the bank. Or, you may just be confused about all the options, terms and conditions that come along with trying to finance your project. Planning your budget carefully is an important step in the home remodeling process. Learning about all the options available to finance your project is the smartest decision you can make when planning the financial side of remodeling.
While many homeowners may be tempted to just put the tab for their home remodel on their credit card, there are more affordable and practical ways to finance. Don't get caught paying high credit card interest when you don't have to. Check out these other financial options:
Refinancing you home is often a great choice if interest rates have dropped since you took out your initial mortgage. By refinancing you could lower your monthly mortgage payments and even save money in the long run. It's also possible to do a cash-out refinance in which you borrow a certain amount of money above your original mortgage to finance other projects, such as remodeling.
Another option involves taking out a home equity loan. These types of loans are based on the equity of your home. It's also possible to set up a home equity line of credit based on your home's equity. Setting up the credit line gives you access to a line of credit when you need it. Unlike a home equity loan, you won't have to pay interest on the line of credit until you use it. A home equity line of credit is a preferred option for many homeowners since there is no interest due until you use the money, and it offers the most financial flexibility.
While taking out a second mortgage may make some homeowners nervous, it can be a good option for those making major changes to their home. If you are adding on to your home with a large remodeling project, you'll see a return on your investment that will justify the new mortgage. While there is always a risk with defaulting on a second mortgage, doing careful planning and setting realistic payment goals beforehand should calm any fears you may have. A second mortgage is common amongst homeowners who are doing remodeling projects.
If you still feel that a credit card may be your best option, opt for a card which offers zero interest for a set number of months. If you're able to pay off the card before the interest starts in, this may be a great option for you.
Still not sure what financial avenue is best for you? Then meet with a professional lender. A lender can help analyze your options and devise a financial solution that should help you feel at ease about your decision, and start you off on the right foot with your home remodel.
Even if you think you know the best option for your financial situation, meeting with a lender at your bank, credit union or other financial institution is always recommended. They can walk you though the process of any of these options and help you fully understand all aspects of your choice.
Whichever option you choose, rest assured that home improvements are a great investment for you and your family. For many people, their home is their greatest asset, and they want to improve and protect it. These financing options are available to make that happen.
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