Home renovation might have been on your to-do list for a while — but you may have placed it on the back burner due to worries about inflation. If you want to push through with your home renovation now, you will want to be meticulous when planning how to finance it. If so, today’s financial advisors are here to lend a hand.
Financial advisors are recommending people looking to start a major home renovation make sure that they adjust their financial plans to accommodate the costs. Thanks to the myriad of economic challenges everyday people are facing today, the demand for financial advisors is increasing, with a 5% growth in the next 8 years. Such is the demand that universities are opening up their courses to online students in order to help plug the gap. These comprehensive online financial service degrees train these advisors in areas such as personal financial advising. As a result, today’s financial planners have a deep understanding of advanced financial theory and risk management — an understanding that allows you to choose from multiple ways to finance your home renovation.
Below are a few methods they’ve formulated that you may want to consider using yourself.
If you want to pay for your home renovation in cash, these are two things you might want to do first. Debt consolidation combines all your existing debt under a single repayment plan. Meanwhile, refinancing involves taking out a new loan that will pay all your existing loans. Similar to what occurs with debt consolidation, you’ll only need to pay back that one new loan afterward. Either method can help streamline the process of saving for a home renovation. However, this may not be the best option if you need to get that renovation done as soon as possible.
Also known as a HELOC, this method of financing your renovation involves opening a line of credit. You can then borrow this amount against the equity of your home. Because it’s tied to that equity, lenders are usually willing to offer you lower interest rates than other methods of financing home renovations. Once your home renovation is completed and your loan repaid, the HELOC can also increase the value of your home. However, it’s important to note that the HELOC may be risky if you can’t make your payments on time. Lenders will earn the rights to your home if this occurs.
If you really need to take out a loan for your home renovation but want to minimize the amount you’ll owe, the home equity loan is your best bet. Unlike the HELOC, the home equity loan offers you a lump sum you can use for your renovation. This makes it ideal for renovation projects where you already know how much you’ll be spending. Since the interest rates on this loan remain fixed throughout the repayment term — or the period in which you can pay back your loan — it’s also a good option for renovations that take place over a long term.
Since interest rates on this loan tend to be higher, you may only want to consider it if your credit score doesn’t render you eligible for a HELOC or home equity loan. However, it offers the benefit of helping your renovation get completed faster. This can be useful for urgent renovations, like those for seniors aging-in-place. We mentioned that making a home safer for senior living would involve major upgrades to the bathroom, like installing grab bars and upgrading the shower or bathtub to a walk-in model. Using a home improvement loan to finance this particular renovation will help it get completed much faster for a senior’s benefit. The repayment terms for this loan are also shorter, so you can be rid of your debt sooner.
Renovating your home in uncertain economic conditions — like the high inflation we’re experiencing — can be challenging. Fortunately, there are many ways you can prepare for and finally complete the home projects you’ve been eyeing.