The current economy has made it much harder for one to move houses as frequently as they would like too. Due to the heavy expenses to be incurred, a majority of homeowners are finding it easier to remodel their current homes by remodeling rather than moving.
Although remodeling a home is not as cheap, it is by far much affordable and manageable. The homeowners can also get to remodel the house to complement their tastes as well as make it more aesthetic and pleasant.
When remodeling a home, one can get financial funding through various avenues such as home equity loans, Roth IRA, home improvement credit card and 401(k) loans.
Home equity loan: If one has a good credit score and enough equity for their home, then, getting a home equity loan wouldn’t be a problem.
The reason why this kind of loan is highly preferred is that unlike other loans, like the home equity line because the interest rates are fixed.
Repaying the loan, therefore, wouldn’t be much of hassle to the homeowners. In addition to this, home equity loans are easier to apply for and get approval than all the other forms of loans.
In case you are a contributor to the Roth IRA, it would be easier for you to withdraw your contributions and use them for your home remodeling. These contributions are never taxed.
However, if you choose to withdraw more than you contributed, then, you will be obliged to pay tax. Roth IRA is ideal for someone who has been contributing for a long while.
Moreover, even after the withdrawal, you will not be obliged to return the money, but it’s always important to do so for you never know when you’ll need to make another withdrawal.
Home improvement credit card: If you are remodeling your home and don’t have enough finances to support your venture, then you could consider using your home improvement credit card.
Since the credit card is specially meant to help you make improvements to your home, it would come in handy at this time.
Although the credit card has its own few disadvantages, compared to the amount of money you would have spent in looking for and buying a house, at the day of the day, every penny will be worth it.
One can choose to apply for a 401(k) plan if all of the above alternatives are unavailable. This is because the 401(k) loan form of financing is a bit strict especially with the high interest rates and penalties that may come by if one fails to make the repayment on time.
The loan also gives one a specified period of time to repay the loan which may be a bit too stressful to the homeowner. On the brighter side, one may be allowed to borrow as much as $50,000.
Home remodeling requires that one first establish a budget on how much they are willing to spend on the project and the source of the finances.
The idea of home remodeling shouldn’t be impromptu for it should be considered only when one is giving up the alternative of moving houses or when one wants to put their house on the market.
Impulsiveness could there contribute negatively to your finances and may end up leaving you more indebted than you ever were before.
Getting Ready for a Major Home Remodeling Project
Homeowners spent almost $19 billion on home remodeling projects last year, reports Scarborough. The company’s analysis shows that the trend to remodel and stay in a home is on the rise.
If you’re getting ready for a big remodeling project, then read these tips on how to be ready. You’ll have a less stressful project that you’ll be more happy with when it’s completed.
Get the Planning Out of The Way
The more planning you do, the less surprises you’ll have along the way. First is the design for your project. Make sure everything you plan to do is there in detail. Changes in the plan along the way can be costly.
If you haven’t found a contractor, drive around the neighborhood and look for other house projects that are in the works. Talk with people and get recommendations. Check out Angie’s List for remodelers that work in your area.
Once you’ve found a contractor, walk them through your design to make sure everything is on the table. Even adding in the cabinet hardware later in a kitchen remodeling project can affect your budget substantially.
Make sure you check with the local building codes office. If you are adding a deck, a sunroom, or even finishing your basement to live in, you will have to follow city and county codes for construction. Your contractor will know what to look for or they can guide you to the correct office.
Establish Your Budget
Once you have a solid design, plan your budget. Make sure you account for every aspect of the project. Did you add any surveying fees to map out the property if you’re putting in a fence? Did you budget for a service such as Next Day Dumpsters to remove construction materials from the wall that has to come out? Did you budget for the equipment needed to pour the concrete footing for the deck?
It’s impossible to foresee all of the final expenses. That’s why She Knows Home and Garden suggests adding another 10 to 25 percent onto the budget for contingency.
Financing the Project
How long will you live in the house after the remodeling project? If you plan to be there several years, a second mortgage could be an option, especially if you can have that paid off before you sell the house.
A line of credit at your bank is useful for smaller projects. If you won’t be there long, then dipping into your savings for a smaller project might leave you better off than a large debt on a home you want to sell soon.
Be Prepared for Things to Change
Inevitably, the plans will change and you could find yourself in a really chaotic situation. Do you have “Plan B” in place? Are you able to deal with chaos while the project continues?
If the contractor finds termite damage in the floor joists and they have to be replaced along with the subfloor, how much longer can you stay with family, or do you need to move into a motel?
Keep on Top of Your Project
To reduce your risk of major headaches like the one mentioned above, keep constantly communicate with the contractor. Ask for updates, what’s going well and what isn’t. Keep a record of your conversations and don’t hesitate to ask questions about any part of the project.
Don’t be like the Pennsylvania couple who lost loads of money on a remodeling project. Thousands of dollars into the project, the city inspectors shut it down because the contractor failed to get the right building permits. The couple started asking questions way too late into the project.
Real Renovations: How to Finance a Finished Basement
When your house was originally constructed, perhaps you originally intended to get around to getting the basement finished after a few months. The concrete was installed, but the studs and joists are still showing.
Further electrical considerations may be in line as well, which could require spending a little extra money to get it all in place. Once everything is finished, you are sure your basement will be a totally cool place to hang out, watch television, and even invite friends over on the weekend for sports parties.
With a basic idea of what needs to be completed, all that is missing is to check out a few custom home builders in Toronto and to raise the capital necessary to finance the project. Here are a few ideas of how to get the financing you need to finish your basement.
Home Refinance Loan Option
Refinancing your preexisting home loan to finish your basement could potentially be an awesome idea. If the interest rates on your original mortgage were higher than the current rates this will provide you with the added benefit of lower mortgage payments at a lower rate.
In addition, since you are not risking any equity in your home because this is a refinance option being employed for home improvement, you will be able to write off the interest paid on a refinanced loan on your taxes.
The Second Mortgage Option
Since you already have some equity in your home, it may not be such a bad idea to attempt to obtain a second mortgage on your home. If you have a good source of regular income and can handle the additional financial burden of a second mortgage, then such a move may be an easy solution to your funding needs.
If your credit is poor and your income is below average, then a second mortgage may tend to be a bit riskier a move for your situation. Be sure to comb over your financial and credit situation thoroughly before considering this option.
Borrow Money From Your Parents
Another great way to obtain the money to finish your basement is to ask your parents or good friends for the money. Sure, no one likes to have to beg for money, but there is upside potential for this option. For starters, parents will likely not be dead set on charging you any interest.
If you are late paying them back, this will tend to not destroy your credit either. This makes borrowing money far safer a financial move than borrowing money from another lending agency.
Funding your basement finishing project may seem complicated at first, but it doesn’t mean it’s impossible. You must simply take the necessary steps and check out all your options.
Before checking with any lending agencies, be sure to pull your credit report, and fix any blemishes on your credit for best results. Before long, you should have the money you need to bring your basement to completion.
Read also: Would Refinancing My Home Be Worth it?