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Can You Finance Your Home Renovation?

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Home Page > Home and Family > Can You Finance Your Home Renovation?

Can You Finance Your Home Renovation?

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Posted: Jan 24, 2010 |Comments: 0

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Can You Finance Your Home Renovation?

By: Tauqeer Ul Hassan

About the Author

After getting idea about the renovation cost for your home, you should know how to prepare new surfaces for your home. Colors are the most important part of a home’s beauty. You should know how to use colors to design your home. Good combination of colors makes your home look beautiful.

(ArticlesBase SC #1774729)

Article Source: http://www.articlesbase.com/ – Can You Finance Your Home Renovation?

Whether your renovation project involves putting in a new 0 sink or ,000 kitchen, at some point labor and materials people are going to stick out their hands and say, “Pay me!”

In almost all cases the supplier will want cash (unless it is a large company that handles its own financing, rare in this field). So now you must find a way to come up with the money.

Typically you’ll need to pay a portion of the renovation cost up front when the job starts and then the balance when it’s finished. For big jobs, midpoint payments may also be required.

As you begin figuring out where to get the money, the most impor¬tant mistake to avoid is to think piecemeal. You should always attempt to arrange for the maximum amount of funds you will need. If you estimate your project is going to cost ,000, then get financing for the entire amount. (Actually, arrange for ,000, just to be sure!)

Never, ever, start any renovation project unless you have arranged for all the financing. Be sure you know exactly where the money is coming from to complete the job before you begin. The last thing you want to do is to find yourself halfway through the project without enough money to finish. You could end up with a ripped-apart home that you might not be able to live in, might not be able to sell, and (if things go really badly) might even lose to foreclosure!

Can I Really Afford to Do It?
My mother used to tell me, “Don’t have eyes bigger than your stom¬ach!” She was cautioning me not to waste food, to take only as much as I could eat—good advice for anyone.

A similar approach applies when renovating. Never tackle a project that you can’t really afford. Yes, a new ,000 bathroom will add enormously to the livability of your home. And eventually, when you decide to sell, it will add value and salability. But if you can’t afford to spend ,000, it doesn’t matter. You shouldn’t tackle the project.

An exception here is if you’re renovating in order to resell quickly (which most people aren’t). Here, you must create a sales plan that incorporates all the costs of renovation (including finance interest and sales expenses), plus your profit, to be recouped from the sale. Even so, you’re walking a fine time line—if you don’t sell quickly enough, the renovation costs could cause you to lose big time.

So how do you know if you can afford it? Most of us think we have an accurate feeling for what we can and can’t afford. We can afford a Chevy or maybe a Toyota. But a Lincoln or a Rolls Royce is out of our reach.

Maybe so, and then again maybe not. My own experience in deal¬ing with hundreds of real estate borrowers is that often people either exaggerate or minimalize what they actually can afford. It may turn out that you really can afford more, or less, than you think.

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(ArticlesBase SC #1774729)

Tauqeer Ul Hassan -
About the Author:

After getting idea about the renovation cost for your home, you should know how to prepare new surfaces for your home. Colors are the most important part of a home’s beauty. You should know how to use colors to design your home. Good combination of colors makes your home look beautiful.

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financing a home – The Truth About How to Save the Most Money Financing a Home Renovation

Renovating your home is a stressful process but it is a great way to improve its appearance and make it a more enjoyable place to live. A home renovation can greatly improve the way you and your family live, and once it is completed it will increase the value of your home. Renovating your home is probably one of the biggest financial investments you will ever make but if the financing is properly structured you can save thousands of dollars in interest charges. There are many different options available when it comes to financing a home renovation and we will examine three different options to see which is the most cost effective.

One alternative that many homeowners use for financing a home renovation is their credit cards; this is probably the most expensive way to go. Most credit cards charge approximately 18%-30% interest and if you consider the monthly compounding the interest charges are phenomenal. If you were to use a home improvement project of thirty thousand dollars as an example, with a credit card that charged 19% interest the payments would be approximately 9.00 per month for interest only payments. That means if you paid only the minimum payment every month you would never bring down the balance.

Another option is an unsecured loan such as a line of credit or bank loan. An unsecured loan is a loan that the bank gives you based solely on your credit history and since there is no collateral for the bank, this type of loan is a higher risk so the interest charges are higher. The average unsecured loan charges an interest rate of 10% -13%. Using the last example of a thirty thousand dollar renovation and a ten year term with an interest charge of 10% the monthly payment would be 3 per month. This is a much less expensive way to go to finance a large project.

The third alternative is a secured loan such as a secured line of credit or a refinance. The difference between a secured loan and an unsecured loan is that the bank uses the equity in your home as collateral. This type of loan is much less risky, so the homeowner is rewarded with lower interest charges. Interest charges range depending on the type of secured loan you decide to go with, a secured line of credit generally fluctuates with the prime rate. The least expensive choice is a refinance, what this means is that you take your renovation and combine it into your current mortgage.

With a refinance you are increasing your current mortgage amount and monthly payment but by doing so you are saving a loan payment and getting great rates that range anywhere from 4%-6%. A homeowner whose house is worth 0K and they owe 0K has a monthly payment is 62. If they were to consolidate the K renovation into their current mortgage the payment would be 39/month. That would save the homeowner 6 per month when compared to a traditional bank loan. It is apparent that the most cost effective way to finance a home renovation is a secured loan, now deciding on which type of secured loan that is best for your personal situation.

There are many factors to consider and each homeowner’s situation is different so the best thing to do is to get some help from a professional. A specialist at the bank will recommend programs offered by their bank, not necessarily what’s in your best interest. Using a mortgage broker will offer you unbiased advice because they are familiar with all of the different banks and their programs and they have access to the best rates available. Whichever way you decide to finance your renovations be sure to consider all of your options.

A leading Islamic finance company talks about home ownership the Sharia way.

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