If you’re planning on having some home renovations done in the near future, Stamford Home owners may be considering your financing options. The first thing you’ll want to consider is the size of the job, the price tag of the project, and how long it will take to complete. Once you know that – it’s easier to make a decision.
Pay with Cash
If you have savings you’d be willing to use, cash may be an excellent choice. Unless you can get a loan at very low interest, it would make more sense to borrow the money.
Borrow From Your 401(k)
Another option is to borrow from your 401(k) – this may be the way to go if you only need the money for a year or less. Perhaps you’ll be getting a bonus or selling another property. In that case, you know you’ll have the funds to pay back the 401(k).
Cash-Out Refinance
What about a cash-out refinance? As far as loans go, you’ll probably get the best overall long-term interest rate. This type of loan is best for large projects, for example:
- Home additions
- New kitchen and bathrooms
- Whole house renovations
Plan on being able to borrow 80% of the home’s value minus other loans. Here’s an example:
- $1,000,000 home value
- $800,000 max loan (80%)
- -$400,000 current mortgage
- $400,000 additional available
You could refinance and get $400,000 cash (minus fees) and have an $800,000 new mortgage in the scenario above. If your home is paid off, you can still take out a mortgage and get up to 80% cash out.
Home Equity Line of Credit (HELOC)
A HELOC gives you a line of credit that you can draw from up to the limit. This type of loan is good if your project is done in stages. For example, if you plan to add a second story this year, and next year you want to install a pool. With a line of credit – you only withdraw what you need.
- The advantage of a HELOC is you’re not paying interest on funds you’re not using.
- One disadvantage is that the interest rate is variable and can go up.
Home Equity Loan
A home equity loan is similar to a HELOC in how much you can borrow – but you receive your funds in a lump sum. This type of loan is good if you know exactly how much your project will cost and the time frame. For example, with Remodeling Consultants, we give you a fixed price. That is a significant advantage over an open-ended bid that’s hard to plan for.
Home Improvement Loan
This type of loan goes by different names. Sometimes it’s called a personal loan. Although the interest rates aren’t as low as a mortgage loan, they are lower than credit cards.
The best place to shop for these types of loans is through your local credit union. You’ll receive a lump sum. The rate is fixed, and you’ll have a set monthly payment amount. That makes budgeting easier. The maximum loan amount will vary, but most lenders will loan up to $50,000.
Credit Cards
If you have a small project, a credit card could work. But if a 0% offer tempts you, read the fine print. The interest rate could increase substantially after the initial period.
We hope going over these financing options has been helpful. Knowing your project cost and timeframe will make financial planning much easier. And with Remodeling Consultants, we can plan your project from start to finish and give you a flat price.
Remodeling Consultants – Home Renovation Experts
Now is the perfect time to schedule the home improvements you’ve been dreaming of. Remodeling Consultants have proudly served Westchester County, NY, along the NY border in CT, including New Canaan, Greenwich, Westport, Wilton, and Stamford for over 55 years.
Contact us today in Westchester or Fairfield County. You can call our New York office at (914) 381-6900 or our Connecticut office at (203) 321-1250.
