Are you dreaming of a new kitchen, or, thinking about renovating the bathroom?One of the first things you’ll want to consider is how you’ll pay for that remodel. While it is true that a portion of the costs of many remodeling projects can be recouped when you sell, you’ll still need to gather the funds to pay for your project upfront.
The National Association of Home Builders outlines several possible funding options:
Good old cash: Just keep in mind that interest paid on home improvement loans is generally tax deductible.
Home improvement loans: There are actually several FHA products geared toward remodeling, such as the Title 1 loan, or 203(k) loan.
Home equity line of credit: If you have an equity in your property, you may use a line of credit and pay interest as much as you cash out.
Second mortgage: Basically, a fixed-rate, fixed-term home equity loan.
Cash-out refinancing: This has been very popular in recent years because interest rates have continued to drop.
Whatever financing option you choose, I recommend staying within your budget. Only spend 80 percent of what you can afford. Let the other 20 percent act as a reserve for unexpected expenses.