How to Pay for Home Remodeling

Remodeling your home can be an expensive process. However, the benefits of renovating are numerous: increased resale value of your house, increased quality of life, and often lower energy bills. Enjoying these benefits may mean not waiting until you have saved enough money to fund remodeling projects out of pocket. Fortunately, there are many different ways you can pay for home remodeling.


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    Refinance your mortgage using the "cash out" method. A popular method of funding home improvements is called a cash out refinancing. This means swapping your existing mortgage for a new one, and converting some of your accumulated home equity into cash in the process. This is an especially tactful move if interest rates are low. However, be aware that doing this reduces the amount of equity you have in your home, and thus will extend the amount of time you spend making mortgage payments.
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    Obtain a home equity line of credit. Another way of getting cash for home remodeling is by setting up a home equity line of credit. This is an open-ended credit agreement that is secured on the equity in your house. It functions like a credit card in that it has an overall spending limit, and you can carry a balance over from month to month. Using debt secured on your own home equity makes sense for funding remodeling, as remodeling projects often increase your equity anyway.
  3. Image titled Pay for Home Remodeling Step 3
    Obtain a second mortgage on your home. A second mortgage, often called a home equity loan, is structured just like your existing mortgage. The key differences are that the term is usually shorter and the interest rate will be higher because the second mortgage is subordinate to your existing mortgage. When pursuing a second mortgage, take on only as much extra debt as is needed to finish the remodeling.
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    Seek a personal loan secured on another asset. Loans for home improvement do not have to be secured on your home equity. Lenders are often willing to extend loans secured on other large assets such as cars. These loans will tend to have shorter terms, so you should ensure that you are able to pay the money back in time.
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    Pay for the home remodeling with consumer credit. This is one of the least favorable options for financing home renovations, as interest rates are high and the unrestricted nature of consumer credit can encourage abuse. Aim to use consumer credit only for emergency home repairs, and pay off your balance as quickly as possible. Note that abusing consumer credit can easily damage your credit score and further prevent you from securing home equity loans and lines of credit.


  • Remodeling projects that provide a significant increase in resale value (such as kitchen remodels) do not need to be paid off before selling the house. This is because you will realize the added value upon selling the house, at which point you can pay down the loan used to finance the remodel.
  • Look for government-funded incentives to save money on home remodeling as well. Tax credits are readily available for installing energy-efficient fixtures and for adding insulation and weather stripping.

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Categories: Build Design & Remodel Own Home