Gathering the necessary finances for home improvements can be daunting, be it for minor home repairs or for a newer and more aesthetic home makeover. It can be tough to secure funds, especially in a short period of time. Fortunately, financing for home renovations have evolved to a variety of convenient methods, 6 of which are discussed in this article.
Here are 6 great ways you can finance your home improvements and when it’s best to use them:
The greatest benefit about using credit cards is the convenience. There’s no heavy paperwork or waiting involved. However, this greater convenience comes at a cost. Credit cards have very high interest, so this method is best for small-scale renovations where you need money quickly but can pay back the loan in full, before you incur high interest.
Cash loans are a great way to finance home renovations. They are typically short-term, unsecured loans. There is no need to put up anything for collateral, so there’s less time wasted, and paperwork involved, which means they are one of the most convenient types of loans. Cash loans are best for medium-scale renovations where you can pay back the money in a couple of months.
Some types of bank account allow you to take out overdrafts. After you have depleted the funds in your account, you can keep withdrawing extra money up to a certain limit. The benefit here is that you only pay interest for the amount you use. In a loan, you must pay for the whole amount even if you end up not using the full amount in the loan. So, overdrafts are great if you’re doing small-scale renovations but not sure how much money you will need. They are also incredibly convenient.
If you’re doing relatively large-scale renovations, personal loans can be a great financing option. You can either take out a secured or unsecured personal loan. However, unsecured ones will have a higher interest rate. Personal loans are great if you need to take out a larger sum of money and you need a longer payback period (over a year).
5.Refinance Your Home Loan
If you are on top of your mortgage payments and have built up enough equity, refinancing your home loan can be an easy way to fund your home improvements. You can increase the size of the existing home loan to include the money for the renovations. You could also then place that renovation money in a 100% offset account so that you don’t pay interest on this extra amount until you use it.
6.Top Up Existing Loan
You could also simply ‘’top-up’’ your existing home loan which means you borrow additional money on your current loan. Not taking out another loan will save you a lot of time and effort. You may also end up with a lower interest rate than if you took out a separate loan.
It’s not surprising that people are so invested in home improvements. Given the gravity of economic uncertainties, the increased value from home improvements can really pay off in the future. However, how much your home makeovers will increase the property value will depend on the type of renovations and more importantly, how you finance them.