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How to pay for home improvements: guide to the options

How to pay for home improvements

Guides you through the options for how to pay through home improvements, whether for customising a new home or upgrading your current one.

Moving into a new home that needs some work? Lived in your place for a while and it is ready for some updates? Regardless of the reason, when you are ready to make some changes, the cost can be overwhelming. One of the first things you find out as a new homeowner is that everything is more expensive than you imagined. Sure, you are building equity, but that doesn’t help much when the HVAC stops working.

How to pay for home improvements: the options

If you need to make some improvements and are looking to find the funds to do so, you have a few options. The best choice can depend on how long you have owned your home, how much you need, and the quality of your credit.

Personal Loans

Personal loans have some strong advantages when you need to borrow for improvements. The industry has been adept at moving online, meaning you can shop rates, apply, and get the money you need without leaving your house. The ability to compare offers and explore your options online makes personal loans the go-to choice for many people who want to make repairs or renovations.

Home Equity Loan and Lines of Credit

Using your equity to borrow money is another way to finance repairs. While this can be a good choice, it is not for everyone. The process isn’t as quick as taking out a personal loan. You may also run into issues if you haven’t lived in your home for long. You are using equity as collateral. If you haven’t lived there long enough to build up this equity, you may not qualify for this type of loan. Another disadvantage of this type of loan is that your home is on the line as security. Of course, you don’t plan to default, but a job loss or other unexpected event can cause you to lose your home if you fall behind on payment.

Credit Cards

In very few cases, credit cards are a good option when financing renovations. Your credit card interest rate will more than likely be higher than rates you would qualify through other channels. However, those with excellent credit often receive offers for zero percent interest over a particular period. If you are confident you can pay the balance off before the promotional period expires, credit cards can be a good choice.

Mortgage Refinancing

If you have lived there for some time and have equity built up, cash-out refinancing may be an option. In this process, you refinance your existing mortgage with a new one. You will have a new interest rate, so if rates have dropped since your initial purchase, you may save money in the process. Unlike an equity loan or line of credit, this remains your only mortgage. You continue to pay the mortgage, which includes the amount that you cashed-out during refinancing. 

The amount you can cash-out depends on your equity. If property values have changed significantly or you have made investments in your property since the initial purchase, it may be worthwhile having a reappraisal performed. A higher appraised value results in more available equity.

How to pay for home improvements: Make a checklist to help keep the budget under control

The checklist gives you an overview of all renovation and renovation work. In addition, you can also estimate the costs right away. So you forget nothing and are well prepared for the next planning steps.

In contrast to the new building, the modernization is often planned, organized and coordinated by the builders themselves. However, the whole project can be very extensive. Good planning is the key. Attempts to gradually refine the planning and always keep an overview of all works.

It is best to list all the necessary renovations. A renovation checklist here will help you with this.

It is best to list the projects for the apartment/house room by room. Write down what to do for each room. And consider whether or not this is true at every point on the checklist.

On some topics, it is worth seeking a professional opinion. Eg. whether thermal insulation is necessary or whether the heating, windows, electrical installation, water installation need to be renewed.

But you can also see a lot of things yourself. Just look at everything very closely: Is the cellar damp? Is the roof leaking or are the roof beams rotten? What have been the heating costs of recent years? What is the state of the windows? Is the plaster okay? However, there can always be surprises in an old building, e.g. what is hidden under the flooring…

Plan your time generously!

Away from the financial aspects, the renovation of a house or apartment is usually also very time-consuming. Skilled buyers can save costs by carrying out many of the work themselves. However, a corresponding time quota should also be allotted and available for this purpose. 

It is important to note that unforeseen additional construction can often occur, especially in the event of a renovation or (particularly) an old home needing restoration. The time to move in should therefore be flexibly planned – an already cancelled rental apartment provides unnecessary pressure and stress. 

Also consider consequential costs incurred by the maintenance of the property. As we mentioned earlier, good cost planning should already be designed in terms of what you calculate you will need for the home improvements.