Different options to borrow Money for your home improvements
Renovations to your home can become very expensive very quickly, and sometimes it’s not an option to do the renovation in pieces until you can save up the money to pay for the rest of it. Some lenders offer the option to borrow small amounts of money to complete the renovations you’ve planned to turn your house into your dream home. There are a few different options for borrowing money for your home improvements, each of them with their own repayment terms.
Home Equity Line of Credit (HELOC)
This option uses the equity you’ve built in your house and gives you that value on a line of credit. Your home will be used as collateral in this kind of lending, but you’ll have all the benefits of a line of credit: revolving credit so you can use as much or as little as you need, minimum monthly payments so you can pay it off are your own pace and you can keep the line of credit open for the future so that you can reuse the money if you want to do more renovations down the road. The repayment length can be as short or as long as you need it to be with this option.
A personal loan is an option that doesn’t use your house as collateral against the loan, so if you don’t have enough equity this could be a great option for you. A loan will be a fixed amount of money, that will likely need to be paid back in pre-determined installment payments. The downside to this is that you can’t select how much your payments are, or how long it takes to pay back. Loans are usually set out to be paid back within 5 years time so you can’t continue to use the money over the years as you pay it back. These loans are also usually given in increments of $5,000 so you might have to take more than you need to complete your current renovations. This type of loan would be best for smaller renovations as borrowing large amounts of money on a personal loan could mean large payments you need to make on top of your mortgage.
Refinance Your Mortgage
If you have the equity in your home, you could refinance your mortgage and pull that money out so that you have the funds to do the home improvements you want. The benefit to this type of home renovation loan is that the money borrowed is part of your mortgage so you don’t have any extra payments to make as you’ll pay this back as part of your mortgage. This type of loan is best if you plan to do a massive overhaul on your home and need an extensive amount of money.
No matter how big or small your home improvement plans are, there are financing options that are right for you and the amount of money you want to spend. Talking to your mortgage broker can help determine which option is best for you!