Kitchen & Bath Blog

With all the added time spent at home over the last year, perhaps you have decided it is time to remodel your kitchen or bathroom. Even some of the smallest upgrades and improvements can increase your home’s equity. The first question you might have when considering a larger home improvement project is, “What is the best way to pay for my remodel?”

Unfortunately, the cost of raw materials has increased exponentially over time, and having cash savings to finance a large project might not be feasible for all homeowners. It also might not be practical to do the project yourself. While doing your own labor would be a tremendous cost-saving measure, it is simply not doable for everyone. Fortunately, there are a few ways you can finance your home renovation to ease the financial stress.

Credit Cards

Using credit cards to finance a home remodel project seems straightforward; however, there are a few things to keep in mind if going this route. You may choose to open a new credit card to finance your project. Look for a card with perks like low or no introductory interest rates or cash-back/rewards bonuses. These benefits can be extremely helpful when paying for your project, especially if the project is on a smaller scale. However, credit cards can also impose a significant risk if you do not manage them appropriately. Be sure to keep a close watch on spending so your incurred debt does not snowball.

Government Programs

A couple of government programs exist to help homeowners finance improvement projects, including Home Improvement Programs (HIPs) and property tax exemptions. Firstly, HIPs are typically low-interest or no-interest loans that help you save thousands. The savings come in the way of subsidized interest for the loan that does not have to be repaid. These loans are typically capped at predetermined amounts, are associated with bureaucratic red tape, and limit the types of remodeling projects they can be applied to—no luxuries like pools and patios.

Secondly, property tax exemptions allow for partial or total local property tax exemptions while doing a home renovation. The downside of this type of exemption is that it is temporary, and these exemptions vary widely by municipality. Typically, your local tax assessors administer both HIPs and property tax exemptions, so contact them for all the details specific to your county or city. There can be a ton of governmental hoops to jump through with these options, but if you can qualify, you should find the hassle to be worth it in the end.

Home Equity Loan or Line of Credit

A Home Equity Loan or Line of Credit (HELOC) is a loan taken out against the equity of your home (appraised value minus the amount left to pay on it). This type of loan is typically ideal for sizable projects thanks to the large amount of money you can borrow and the lower interest rates associated. On the other hand, since depleting the equity of your home will reduce how much money you will receive from the eventual sale, a HELOC might not be ideal if you do not plan to stay in the home for a significant amount of time.

Determining the Best Financing Option for Your Home

When choosing a method for financing your home improvement project, keep in mind your personal spending habits and financial goals. These are vital for selecting a financing option most suitable for your project and one that most closely aligns with your plans. A few things to consider:

• What is the estimated cost of the project?
• How much can you realistically afford?
• Are there any portions I can do myself?
• What are my other current debts?
• How long do I plan to live in the house?

Once you have evaluated these keys factors and viewed the entire scope of the project, you will be better suited to pick the financing option that is best for you.

Speak to a professional contractor or remodeler to determine the ideal budget for your home remodel. The Project Managers at Kitchen & Bath Center can walk you through the whole process and help document costs so that you can plan accordingly.