7 Innovative Ways To Finance a Home Remodeling Project
Wondering how you will pay for your home remodel or repair? Consider one of these financing solutions for your next home remodeling project.
According to HomeAdvisor.com, the national average cost of home remodeling in 2023 ranged from $18,078 to $81,965. There are some homeowners who spent as much as $160,000 for multiple-room improvements.
As a homeowner, before you start looking for financing, it is essential that you meet with your contractor, itemize what needs to be done and come up with a cost estimate. Be sure to factor in contingencies and unforeseen price hikes, generally 10% to 15% of the estimate. Once you estimate your final costs, it is time to determine your finance options.
The good news is that there are several innovative ways you can finance a home remodeling project. Here are seven of them:
1. Home Equity Line of Credit (HELOC)
A HELOC operates like a credit card. Instead of giving you a lump sum, the lender provides you with an active line of credit with a fixed ceiling.
With a HELOC, you can withdraw money as needed during a home remodeling project. Repayments are based on how much money you have withdrawn.
A HELOC is the most popular source of home remodeling financing. Up to half of home improvements, repairs and additions in the United States are financed by a HELOC.
2. Peer-to-Peer (P2P) Lending
A less common and slightly more expensive way to finance a home remodeling project is through peer-to-peer (P2P) lending.
P2P lending websites like LendingClub and Prosper match borrowers with investors who are willing to lend.
P2P lending has less stringent conditions and qualifications than banks and other financial institutions. Moreover, homeowners who can’t qualify for a HELOC and other forms of conventional financing can often access funds through P2P lending.
Expect to pay a higher interest rate on a P2P loan than other finance options.
Sign Up for Savings
Subscribe to get money-saving content by email that can help you stretch your dollars further.
Twice each week, you'll receive articles and tips that can help you free up and keep more of your hard-earned money, even on the tightest of budgets.
We respect your privacy. Unsubscribe at any time.
3. Reverse Mortgage
A reverse mortgage enables a homeowner to access the equity of his home. The owner can use the funds however they want, including to remodel or renovate the home.
A reverse mortgage is only available to people 62 years and older.
4. FHA 203(k) Loan
A FHA 203(k) loan is backed by the federal government and given to home buyers who want to buy a damaged or older home and make improvements to it.
When a home buyer encounters a property located in a satisfactory place but needs substantial improvements, an FHA 203(k) loan can be handy. It comes with lower interest rates and a smaller-than-usual down payment, sometimes as low as 3.5%.
5. Mortgage Refinance
Refinancing a mortgage is one of the more common ways homeowners finance their home improvement projects.
Except when interest rates are high like they are right now, a mortgage refinance can provide the much-needed cash for a home remodeling project and may result in a lower interest rate. Moreover, a mortgage refinance provides ample opportunity to convert a variable-interest mortgage to a fixed rate.
Related: Should You Refinance Your Home?
6. Energy-Efficient Mortgage
A homeowner can benefit from energy-efficient financing for buying, selling, refinancing or remodeling a home.
An energy-efficient mortgage is a beneficial way to finance a home remodeling project that will increase the home’s energy efficiency. Some states have programs specifically for their residents.
The sole purpose of this loan is to enable homeowners to make their homes more energy-efficient.
7. Home Improvement Loan
Several financial institutions offer home improvement loans to make improvements and repairs to a home. They can be given for various home improvement projects, ranging from a simple roof repair to a multi-room remodel.
Reviewed November 2023
Wouldn't you like to be a Stretcher too?
Subscribe to get our money-saving content twice per week by email and start living better for less.
We respect your privacy. Unsubscribe at any time.
Popular Articles
- 7 Habits of Highly Frugal People
- 5 Simple Budget Cuts That Can Save $200 a Month
- How to Track Down Unclaimed Funds Owed You
- 32 Ways to Save Money on Your Utility Bills
- Do You Need Credit Life Insurance When Buying a New Car?
- How to Maximize Profits When Selling Online
- Staying Motivated to Continue Digging Yourself Out of Debt
On After50Finances.com
- 9 Things You Need to Do Before You Retire
- You Didn’t Save Enough for Retirement and You’re 55+
- When Empty Nesters Reorganize and Declutter Their Home
- Reinventing Your Career in Your 50s or 60s
- What Mature Homeowners Should Know about Reverse Mortgages
- 2 Reasons to Collect Social Security Benefits As Soon As Possible