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Best Ways To Fund Home Improvements From Those That Have Done It

Ways to Prepare for and Finance Home Improvement

Whether you’re in the market to buy a new house, sell your current house, or improve your home, you might be looking to improve or renovate and have heard that renovation loans or home improvement financing may be an option. Renovations can go a long way in improving the equity of your home, but they can also take a sizable chunk out of your wallet.

That’s why you might be considering taking out a loan to finance those improvements.

Generally, there are two different kinds of loans a homeowner can take out to put towards renovations. The first is a home equity line of credit. This is an attractive option to some because you are using your home’s equity to fund your potential improvement projects. The only problem with taking out a home equity loan to improve the value of your house is that not all improvements create the highest possible return on investment.


Before we write of HELOCs altogether, however, let’s look at why some people opt to use them to fund home improvement projects.

Basically, HELOCs will potentially be the better option when you have lived in your home for quite some time and have built up quite a lot of equity in your home. They also have the added benefit of extended draw periods – averaging around 10 years – and borrowers have the option to delay payments, as well as borrow as much, or as little, as they need.

Because of these specific factors regarding HELOCs, most homeowners looking to improve their property will end up opting to take out a personal loan. Home improvement loans can make it easy to increase your home’s value without tapping into the equity of your loan.

In the end, it doesn’t really matter what you are using your home improvement loan for, you just want to be able to make sure that you are getting the most value out of your loan. Some of the most valuable kinds of home repairs are as follows.

  • Kitchen remodels
  • Bathroom remodels
  • New deck, patio, or porch
  • New or improved exteriors
  • Green homes
  • General repairs

Using a personal loan to get started on any one of these projects can be a fast and simple way to increase the livability, and add value to your home. You’ll want to start by shopping around for a personal loan that works best for you. You’ll also of course want to include your spouse (if you have one) in on the process. While the loan will be in your name, that changes you make to your home and the payments you owe on your loan could end up impacting not just you, but your entire family.

Finding a Home Improvement Loan

The next thing you’ll want to do is start searching for the home improvement loan that works best for you. The best places to look include your banks, your credit union, or online lenders. Once you’ve found an attractive loan, use a loan calculator to figure out how much you can expect to pay each month.

Unlike HELOCs, home improvement loans are unsecured. That means you won’t be tapping into your home’s equity, and won’t have to risk getting your house foreclosed on in the even that you should default on your loan. That’s obviously good for a number of borrowers, but there are also factors that will impact whether or not you should borrow.

Home improvement loans are perfect for these kinds of potential borrowers:

  • Borrowers with good to excellent credit
  • Borrowers who have recently purchased the home
  • Borrowers looking to sell the home

Another added benefit of home improvement loans is that once you get approved, you can typically expect to get the lump sum of your loan within a week. Other than that, there are quite a few other benefits for these kinds of homeowners who are looking to take out a loan.

Typically, the repayment period is shorter than that of the average HELOC. They can typically be repaid over 2 to 7 years depending on which lender you end up deciding to borrow from.

There is more freedom in terms of how much you can borrow because the loan amount isn’t directly tied to the equity of your home like HELOCs are.

Fixed vs Variable Interest Rates

Another great benefit of home improvement loans is that they come with fixed interest rates. That means that payments will remain stable month in and month out, meaning you can better plan for what you will owe, and what you have to make each month to continue affording your loan.

Finally, they offer potentially lower closing costs. That’s because origination fees vary per borrower’s credit score instead of a fixed 2-5 percent of the loan.

Steps Taken When Applying

Now that we have the basics on how to finance your improvements, let’s look over one more thing: how the gauge the overall price of the improvement you want to make. To make it simple, break it down into three simple steps.

1.Consider your future plans: Consider how long you plan on living in your home. Do you think you’ll move in the next 5 years, or do you see yourself growing old in your current home? This will likely decide what kind of improvements you intend to make, and how much you intend to spend on them.

2.Consider the type of project you’re looking to begin: Basically, there are three different kinds of improvements. Repairs, midrange, and upscale. The names are fairly self-explanatory and will simply help you decide how much you can expect to have to borrow.

3.Call local contractors and get an estimate of the project: This is the final step. Once you have considered your future plans and estimated the cost of your loan, get in touch with companies that you might want to take the project on and a feel for how much you can expect to pay.


All that’s left to do is to get crucial information together, such as your credit score, the cost of your project – which you now have thanks to the estimates, your debt to income ratio, and your personal information.

After that, it’s time to get to work on your very own home improvement.

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