What’s the Best Way to Pay for a Home Renovation?
As a Community Financial member, you have several choices when it comes to funding a home renovation. And we want to help you find the right one for your specific needs. First, let’s take a look at some of the most common choices and see which may be the best fit for financing your home renovation project.
1.) Home Equity Term Loans
A home equity term loan is a loan that’s secured by your home’s value. Home equity loans allow you to borrow a fixed amount of cash, which you receive in one lump sum.
- Receiving all the funds at once can push you into spending more than you need.
- The amount you borrow may not be enough.
Credit cards can work for minor touch-ups, but funding bigger projects this way can lead to higher interest payments.
- Your credit score may be negatively affected by the large, unpaid balance on your card.
Personal loans are short-term loans that are available in a variety of amounts and interest rates that may or may not be secured by a form of collateral.
- Receiving the entire amount in one lump sum can lead to overspending.
Some retailers encourage customers to finance home renovations on a store credit card.
- Retail credit cards can have very high interest rates.
- With so much credit extended to you, you may be tempted to overspend.
With so many loan options it can be tricky to figure out the best way to fund that home renovation? Enter the Home Equity Line of Credit (HELOC)! A HELOC is an open credit line secured by your home’s value. HELOCs have adjustable interest rates and have a “draw” period for accessing the funds.
Here are the benefits of a HELOC:
- You’ll save money- HELOCs help you stick to your budget since you can withdraw money from your line of credit as needed, instead of all at once. At Community Financial, there are no application or closing fees required.
- Flexible terms- Because you’re only paying interest on the money you withdraw, you’ll have the freedom to take out a larger line of credit and decide how much of it to use later.
- You’re improving your home’s value- It makes sense to borrow against your home’s equity in order to add to its value. When you sell your home, a HELOC may actually pay for itself, and then some.
Your Turn: How did you fund your home renovation? Share your choice with us in the comments!
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