Home Renovation. Sunday , September 16th , 2018 - 20:45:35 PM
Home Equity Loans - These loans allow you to leverage the equity in your home. They are often used to fund major renovations because they offer the needed capital at a much lower interest rate than credit cards or other types of loans. Typically a home equity loan, which can be structured as a line of credit secured against your home's existing equity, is limited to 80% of your home's value, but a mortgage broker can often work for you to secure loans of up to 95% of your home's value. With home equity loans, there may be some setup costs, but like lines of credit, there is room to allow for cost overruns and unexpected expenses.
Loans and Lines of Credit - These are popular options that offer interest rates substantially lower than those charged for credit cards, but often higher than those of home equity loans. One disadvantage of personal loans is that once they are repaid you need to reapply to obtain more funding. Lines of credit are ongoing, up to the credit limit, so there is no need to reapply if you need more funds. (A line of credit with room on it above and beyond the cost or the renovation will come in handy on a plumbing job gone bad - see above.)
Unfortunately, cost overruns are common with home renovations. When budgeting for your home renovation, be sure to leave a contingency fund for overruns or other unforeseen expenses. And as the project proceeds, you may discover that you want to add new items to the renovation, so having a little extra cash on hand is a good idea. Always plan ahead and try to be accurate about the costs of your home renovations. If you are making major changes, a mortgage broker can help you decide on which home equity options are best for you.
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