How to Finance Home Improvement

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Home improvement

If you’ve decided to take on a home improvement project, it’s time to budget your money and find a contractor. But how to finance the project? If you’re looking to get rid of dated, worn-out furniture and update your kitchen or bathroom, you’ll need to learn how to finance home improvements. Here are some tips to help you get started. Budget at least 10 percent more than what you think you’ll need for the project.

Budgeting

Home improvements can add both value and aesthetic appeal to your home. However, home improvement projects can also be expensive, and it is important to set a budget for your project before starting it. According to a survey by Visually, nearly one-third of homeowners went over budget during a home renovation. To avoid overspending, it is a good idea to hire a contractor, as they can often get lower prices than you can.

Before you start the budgeting process, determine the priorities of the projects you want to complete. The kitchen typically represents between 10% and 15% of your home’s value, so your budget should be about $30,001 to $45,000 for renovations. The bathroom, on the other hand, only accounts for about 5% to 10% of the home’s value. You should budget for between $15,000 and $30,000 for bathroom renovations. By keeping track of your finances, you can plan for home improvement projects over time without spending more than you can afford.

Finding a contractor

When hiring a home improvement contractor, you should always ask for a quote before hiring anyone. Every contractor has different expectations when it comes to down payment and final payment. Always get at least three bids. The higher the number, the better. It is also important to understand that an estimate can end up costing more than a fixed price. To avoid this, make sure to get three bids. However, be careful not to pay in cash, as that can be a sign of a shady contractor.

After narrowing down your list of contractors, make a shortlist of ten to fifteen. Shortlist the top candidates. When creating your list, keep in mind that you will likely need more names than you need. You can also ask friends for recommendations. In the same way as with any other job search, social media is a great resource to gather references. And make sure you meet the requirements for each company you have selected.

Financing your project

There are several different ways to finance your home improvement project. Home equity lines of credit, for example, are popular with homeowners because of their low interest rates. A home equity loan offers a fixed interest rate that remains steady no matter what market conditions do. This is a better option for those who know exactly how much a project will cost, but aren’t quite ready to take the risk of putting their house up as collateral.

When applying for home improvement financing, you’ll likely need to provide your credit score and income, as well as your loan-to-value ratio. Loan-to-value ratio is the market value of your home minus any outstanding debt secured by it. For example, if you have a $100,000 mortgage balance, your loan-to-value ratio is 50%. Higher credit scores are viewed as lower risks by financial institutions. They are also eligible for lower interest rates on personal loans and credit cards. To learn more about credit scores, visit Discover’s Resource Center.