Happy New Year! Time to put your goals on paper and plan your year! If you have home improvement on your mind this year, or are simply wanting to complete a few projects in preparation for selling your home, there are many ways to pay for it. Many will dip in to their savings, but today, when cash is king, I want to make you aware of some other options you may not be aware of. Below are a few of them. Give me a call at 619-944-2798, or email me at [email protected] to learn more or to connect you with a reputable lender.
Retirement Savings: Using your 401(k) might be a viable resource to help you pay for a renovation. Before you borrow against this retirement account, be sure and check with your tax advisor and the manager of your account of the terms and any possible penalties you may incur. Many have a a limit of funds you can borrow, a repayment plan implemented through your payroll contributions…and one to really watch out for is the timeline by which the funds must be returned. If you don’t pay it back and you are under 59 1/2, you could incur a 10% penalty. Also, if you lose your job, you will likely still be on the hook for the full amount within 30-60 days, depending on the guidelines. Perhaps one of the riskier funding alternatives, but always an option and a great short term resource that many of my clients have used.
Home Equity Line of Credit: With ever increasing values in Kensington and Talmadge these days, this is a great way to tap in to your equity while maintaining your first mortgage terms (assuming you have already taken advantage of today’s interest rates). A HELOC is a loan against a portion of your equity and is a great tool to use to complete major renovations, depending on how much equity you have in your home. This is often a less expensive way to borrow money as the rates are still quite low. This is essentially a second mortgage against your home, and instead of making payments on the entire amount you are approved for, you only make payments on what you spend. This is ideal if you don’t know the total cost of your renovation.
Cash Out Refinance: If you have not refinanced your home recently and/or your home has significantly increased in value since the last time you secured your financing, this could be a perfect vehicle for you. Current interest rates are rather low across the board. This type of loan allows you to borrow against the total value of your home (usually up to 80%), and allows you to lock in one rate for the total amount (as compared with the HELOC, where you will essentially end up with two different loans with two different rates). The negative aspect is that you will reset your repayment clock.
Personal Loan: If you know how much your renovation will cost, a personal loan will give you a lump sum of money to use, which you’ll repay over an agreed-upon period of time.
Credit Cards: If the project is small, or perhaps you just want to buy new furniture, there are often 0% interest promotions for 12-18 month period of time being offered if your credit is sufficient. I have taken advantage of this myself and it was a great option! With a diligent, calculated repayment plan, you can leverage this credit and pay no interest!
I hope this information is helpful to you and enables you to accomplish your renovation goals in 2018!