Monday, March 11, 2013

Nine Smart Ways to Finance Your Remodeling Project

The Nasty Kitchen!!

 If You Really Want to Blow Up Your Nasty Kitchen, There Are Ways to Finance It!!

Are you in this situation: you know you want to or need remodeling of your Dallas home, but you don't know how to finance it?  That old kitchen is badly in need of a facelift, but you want it done right.  Your kids need their own space, so you want to add another bedroom and a bath.  

During these tough economic times, many families are woried about the cost of home improvements, and put them off, even if they are badly needed. Home remodeling is a financial investment, so it is wise to consider all your financing options before you decide to put off what could actually make you money in the long run. 

Refinance Your First Trust Deed Mortgage

The most common way people finance a home improvement project is through a mortgage loan, either a home equity loan, or a regular mortgage. There is much to learn about financing your remodel through a mortgage broker or bank, so even if you choose to go the most common route, be sure and do your research, read fine print, and compare rates. 

The reason that a refinance of your existing mortgage is the most common method is that it is generally the least expensive.  In the current market that is certainly the case.  It is possible in many cases to refinance your existing mortgage at a lower rate than the current one, take out $25,000 - $50,000 for the remodel, and actually see your monthly payments reduced.  See more on that in a post we wrote:

How to Finance your Remodel with the Same Monthly Payments with Dallas Home Value Increase

Using a Home Equity Line of Credit for Remodeling 

One of the most common ways people finance a home remodel is through a home equity line of credit (HELOC). If you have enough equity, a HELOC allows you to borrow on your home's value, using the home as collateral. You can borrow up to the credit limit, and interest rates are often low. If you go with this option, be sure and shop around for a competitive rate.

This HELOC method is popular, because it can be the fastest and easiest.  Plus you have the flexibility of a revolving line of credit, but at very low interest rates.  You can pay it off faster or borrow more later with the same methods as you would a credit card.  

Using Tax Incentives to Offset the Cost of Your Home Improvements or Remodel

Making your home more energy-efficient is a great improvement that will save you money over time, as well as increasing your home's value. The government offers tax incentives that can offset this expense. Accessing these incentives may help you finance your home build or remodel. Federal tax incentives may be available to offset the cost of upgrading your appliances to Energy Star, or installing solar panels or solar energy systems. There are also green building programs through the state of Texas, and the city of Dallas. 

Today we are talking about financing through Federal Title I loans.

Currently many families are concerned about the cost of home improvements, and may be putting them off, even if they are badly needed. Title I loans may be an option for homeowners who may not qualify for other types of financing because they do not have equity in their home. Loans are available for up to $25,000 in home improvements, and up to 20 year loans. Interest rates are generally much lower than what private lenders.

The Federal Title I program provides insurance to private lenders. Approved lenders then provide Title I-backed loans to consumers. Applications for Title I loans are available through many financial institutions in the Dallas area.

Other Time-Honored Methods of Financing Your Home Remodel

There are plenty of other ways to do the job.  Some make way more sense than others, but you are the only one to make that judgement call:
  • Borrow from Mom or Dad or Rich Uncle or Other Relation or Friend
  • Credit Cards can be a fast approach if you plan a quick pay off
  • Personal loans through banks, credit unions, or finance companies
  • Borrow against other assets such as second homes, investments, autos
  • Borrow against your Insurance Policy
  • Combine different Methods



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