It was reported by Fox Business that Americans are likely to spend more than $ 121 billion on home improvement in 2010, so knowing how to finance home improvement is important. Here are seven of the financing opportunities.
Source for this article: How to finance your home improvement projects
How to finance home improvement – Seven options
Breaking a larger concept down into smaller parts makes it much less daunting; that involves how to finance home improvement. Here are seven steps for solving the problem.
1. Make an effort to utilize cash
It was reported by Fox Business that historically, about 65 percent of homeowners who invest in home improvement pay cash for the job. There are no interest fees and it is simple. However, a large cash outlay can certainly make it more difficult to pay other bills if you aren’t careful. Considering that you will find about 85 percent of today’s homeowners who finance home improvement with cash, even more individuals are budgeting carefully.
2. Use some credit cards
A senior researcher at the Center for Responsible learning, Josh Frank, reminds that revolving interest can keep you in debt for a while. Even the lowest credit card APRs are about twice the rate of standard home loans and home refinance loans. It could skyrocket to 30 percent or more if you miss a payment or two. If you really need to use a credit card, don’t use the card’s cash til payday feature, as the interest rate for cash til payday via credit card is much higher than the standard credit card APR.
3. Use personel loans
Whether you go to a payday lender, a bank or a credit union, unsecured personal cash loan may be available, depending upon your relationship with the institution and your credit score. However, Within the case of a payday loan store, having good credit is not required for personal loans. According to Steven Rick of the Credit Union National Association, such personal cash loan (aka signature loans) could be either higher or lower in rate than credit cards. Thus, it pays to shop around.
4. Work with home equity loans
Because of the housing bubble burst, standards for home equity loans have increased. You may get up to 90 percent of your current home's value in a fixed rate 10-15 year loan with an superb credit score. Fox business says rates should be slightly higher than a mortgage. Fixed-rate loans make long-term budgeting much easier when you’re trying desperately to determine how to finance home improvement projects. Be wary of variable rate loans, as they typically will not go lower and typically will only increase.
5. Trying to use a HELOC
A home equity line of credit (HELOC) sets up an account where the money is there for home improvement if you need it for any reason at all, instead of coming to you in a lump sum as with a standard home equity loan. Make an effort to get a fixed rate rather than a variable one.
6. Get an FHA remodeling loan
The Federal Housing Administration (FHA) has a small remodeling loan program – doing about 3,854 loans in 2009, as outlined by Fox Business – but if you can get in, you are able to borrow up to $ 25,000 for up to 20 years at a very reasonable rate. Any loan more than $ 7,500 is secured by the home itself.
7. Getting some contractor financing
Terms will vary here quite a bit, but if you can get a fixed rate, no points loan with no other hidden fees, a contractor loan can cost anywhere from 5 to 11 percent. It depends upon your credit score also as how much you trust the contractor. Do some research.
Read a lot more on this topic here
Fox Business
foxbusiness.com/personal-finance/2010/06/07/compare-home-improvement-financing-choices/
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