It’s no secret that home renovations can take a lot of time and money, but a home renovation doesn’t just make the home nicer — it can also boost its value, making it a worthwhile investment. But you may be asking, how to pay for your dream renovation?
Whether you’re renovating to boost your home’s value or just make it more livable, you’re probably asking yourself one very important question: How can I pay for this remodel? After all, a major renovation can end up costing a lot of money (the average kitchen remodel, for example, costs more than $20,000!)
Fortunately, there are a variety of options for people who are not in a position to pay cash for their home renovation project. Here are just a few of the options that are available to homeowners:
In This Article
How to Pay For Your Dream Renovation: Personal Loans
Personal loans are a great financing option for home improvement projects because they are unsecured, meaning you do not have to put up collateral to obtain the loan. Personal loans typically require that you have strong credit and qualified borrowers can take a loan up to $40,000 through Prosper.
The benefits of using a personal loan to finance home renovations include a fixed interest rate and set repayment term which makes it easy for budgeting. You’ll also get line of sight as to when the debt will be paid off, since the interest rate is fixed for the full term of the loan.
How to Pay For Your Dream Renovation: Credit Cards
In order to entice new cardholders, some credit card companies offer new credit cards with no interest for a limited period. Leveraging these low or zero interest promotions is another potential financing tool for homeowners who are confident that they will be able to quickly pay off their debt.
While it is possible to use a credit card offer to avoid paying interest, make absolutely sure that you can pay it back before the interest kicks in. Interest rates on credit cards are at a record-high (over 16%), so you’ll likely be able to find a lower interest rate on longer-term financing options, should you expect to need more time to repay the money you borrowed. With interest rates that high, credit cards may be most appropriate for smaller, more manageable repairs/ expenses.
How to Pay For Your Dream Renovation: HELOC
Homeowners who have equity in their home may consider a home equity line of credit (HELOC), which establishes a credit limit that homeowners can borrow against throughout the specified draw period. This is a particularly flexible option compared to a second mortgage or home equity loan, and can be a great solution for large, costly renovations, as you can usually access up to 85% of your home’s equity. Additionally, unlike other options, a HELOC generally offers lower interest rates and tax benefits (interest is deductible on loans up to 100,000).
It’s important to note that most HELOCs have a variable interest rate, which may make it more difficult to budget for how much interest you’ll be paying over the life of the loan. A HELOC also requires that you put up your home as collateral.
How to Pay For Your Dream Renovation: Mortgage Refinance
Mortgage refinancing is another option for homeowners who have enough equity in their homes to borrow against. Essentially, this option replaces your old mortgage with a new one, which can allow you to get cash out from your home’s equity. Unlike HELOCs, a mortgage refinance could have a fixed rate, which can offer some peace of mind and make budgeting easier. And while a mortgage refinance can be an onerous experience, it can be a good option for expensive and long-term home updates that add significant value to the home.
Making your dream home a reality
Whichever financing route you go, make sure your project budget doesn’t max out your budget. It’s important to remember that unexpected costs can arise when you start to open up walls, so you’ll want to leave yourself some wiggle room just in case you go over budget.
Once the workers are gone and the dust settles, you’ll be glad you upgraded your home, making it more beautiful and functional for years to come.
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IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
Eligibility for a HELOC up to $500,000 depends on the information provided in the HELOC application. Borrower must take an initial draw of $50,000 at closing. Subsequent draws are prohibited during the first 90 days following closing. After the first 90 days following closing, subsequent draws must be $1,000 or more (not applicable in Texas). Loans above $250,000 require an in-home appraisal. Loans above $250,000 require title insurance.
The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Spring EQ borrowers get their cash on average in 18 days. The time period calculation to get cash is based on the last 6 months of 2021 loan fundings, assumes the funds are wired, excludes weekends, and excludes the government-mandated 3-day right of rescission grace period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications.
Spring EQ cannot use a borrower’s home equity funds to pay (in part or in full) Spring EQ non-homestead debt at account opening. Minimum draw in Texas is $4,000. To access HELOC funds, borrower must request convenience checks.
Interest rates may be adjusted based on factors related to the applicant’s credit profile, income and debt ratios, the presence of existing liens against and the location of the subject property, the occupancy status of the subject property, as well as the initial draw amount taken at the time of closing. Speak to a Prosper Agent for details.
Qualified applicants may borrow up to 97.5% of their home’s value (not applicable in Texas). This does not apply to investment properties. For Texas HELOCs, qualified applicants may borrow up to 80% of their home’s value.
HELOCs through Prosper may not be available in all states. Please carefully review your HELOC credit agreement for more information.
All HELOCs are underwritten and issued by Spring EQ, LLC, an Equal Housing Lender. NMLS #1464945.
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