One of the biggest investments you can ever make is buying a new house. More so, if you have your house improved through a renovation, this can be added to your list of achievements
Being prepared and knowledgeable about financing a home improvement project are the important factors that you should know to save you from a lot of confusion and frustration about the tedious process. Below are some helpful tips on how you can afford to finance your home remodeling project.
Know your budget
This is your fundamental key to being financially organized. Budgeting is the most important thing to consider when financing your home improvement.
How much can you afford to spend to build your house? This was your first question when you have decided to build your own house. After a while, this question applies to your home improvement.
How much are you willing to spend on your home renovation project? The surest way to stay on track to meet your life goals is to budget. Set a realistic one and stick to it. Know what your priorities are. Lessen your unnecessary spending so you can have more savings. Take complete control of your income so you can save for your home renovation.
- Set your priorities straight
Figure out what’s important to you ahead of your home renovation. Do you rose quartz countertops, a travertine back-splash, and expensive wood floors? Are you willing to compromise the other areas of your house for some luxurious features in an area? Laying out your expectations will help you delegate your budget wisely. Otherwise, you might end up skyrocketing your costs later on.
There are a lot of finance options available for financing your home renovation projects. Some of them are explained below.
A mortgage is typically the most preferred type of financing option. It is a home loan that can be paid off over flexible periods of time. The most common mortgage is a 30-year period. The longer the mortgage period is, the lower the monthly payments. The lower the mortgage is, the higher your monthly payments.
- Home Loans
Banks usually offer this type of loans. Some have as little as 3% down payment required to finance a house. But a lower downpayment means more expenses such as Private Mortgage Insurance (PMI). Banks require PMI if buyers paid less than 20% downpayment to protect them from losing money should the buyer end up in foreclosure.
An FHA loan is a loan that is insured by the Federal Housing Administration (FHA). Some home buyers prefer this loan because it does not require a down payment of 20% or more. While FHA loans don’t have PMI, you will have to pay a Mortgage Insurance Premium (MIP).
- Builder Finance
You can ask your builder if they offer a lender program which may offer better rates and terms than a non-preferred lender.
The most important thing to remember when approaching the finance of home renovation is patience. You have to be financially stable to be able to achieve the architectural look that you want for your house.