Finally ready to start construction on your home addition? You’ll need to pay for it. Here are 6 ideas for how to finance a home addition.
Did you know the typical homeowner spent $15,000 on remodeling projects in 2017? It’s a lot to pay for in cash, and for some, the traditional home equity route isn’t an option.
Does today’s financial market leave you wondering how to finance a home addition? Here are six alternative ways to pay for significant updates to your home.
1. Personal Loans
Personal loans used for home improvement projects become home improvement loans just as a personal loan used for a business becomes a business loan. Getting personal loans with no credit is possible too and there are many businesses that can provide this service for you!
Homeowners like personal loans because compared to refinancing and home equity loans, you get the funds quickly and you skip closing costs and fees associated with changing up your mortgage.
Unfortunately, personal loans tend to be small, and they work well for renovations but may not cover the cost of a home addition.It might also take a while to get your personal loan approved so if you’re looking to get a loan as quickly as possible then you can look somewhere like Car Title Loans San Diego.
2. Credit Cards
If your project is small and you intend to buy many of the supplies yourself, credit cards are a great option.
Credit cards come with a higher APR than a typical loan, but they are fast, easy to use. If you pay them off quickly, they may cost less than the loan origination fee associated with personal loans.
3. Title I Loan
The Department of Housing and Urban Development offer the Title I program to those who don’t have the home equity to use for remodels. These loans are ideal because they offer a lower APR.
Title I loans come with some restrictions. You can’t borrow more than $25,000, and you can’t use them to finance luxury items like pools.
4. Refinancing
Would you benefit from refinancing? If you qualify for a better rate, refinancing is a good option for major improvements, and it should be your go-to tool if you’re wondering how to finance a home addition.
A refinance pays off your loan and issues a new one with a lower interest rate. You can use the money saved on payments to fund a remodel or use the cash out option to borrow against your home equity. You may qualify to borrow up to 80 percent of your home’s value.
5. Home Equity Loan
A home equity loan is a mortgage by another name, and it’s a popular option with at least 1.6 million originations in 2018. It requires less work than a refinance but comes with a higher interest rate. Home equity loans work well for those who already have an ideal mortgage and don’t want to refinance.
6. Borrow from Retirement
If you have a 401(k) or IRA, you can loot those accounts for home improvement purposes. However, you should avoid it unless you are old enough to withdraw. Failing to pay it back incurs a 10 percent penalty, and if you leave your job, you’ll need to pay back the loan quickly.
More Ideas on How to Finance a Home Addition
Sometimes you need to get creative when figuring out how to finance a home addition. Whether it’s alternative lending options or finding new ways to get the work done, there are always new roads to explore.
Ready for more? Check out ideas for home addition projects here.
