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If you've got your eye on that dream kitchen or that new bathroom remodel, then you're probably also not sure where you can find the money to make those dreams a reality. A remodel is one thing, but finding the funds to get that remodel started is an entirely different headache. Whether you look into credit card options, home equity loans or refinancing your mortgage, there are lots of different ways you can find the funds you need for your pending renovation. Just as with any loan or line of credit, be sure you take the time to read the fine print, know your interest rates and understand everything you're getting into. Be a smart consumer and you'll have a smooth and headache-free renovation process.
Get an Estimate
Even if you may be planning to do all the work yourself, take the time to get a full estimate from a professional. Any lender will want an accurate figure before they lend you any money, and a contractor can give you a decent estimate. If you'll be doing the work yourself, then you'll want to get a full list of all the materials including equipment, rental fees and permit fees, then add a 25 percent cushion to be safe. If you are hiring someone to do the work for you, then consider getting more than one estimate so you can be sure you're getting the best value for the work you need.
Home Improvement Loans
Now that you know how much you'll need, it's time to find the money to get your remodel done. The Federal Housing Administration provides two loans designated just for home improvements. There is the Title I loan, which allows you to borrow up to $25,000 at a fixed rate. The second option is called a Section 203k loan, which is a single, long-term loan for those who purchase a home that needs a lot of improvement. In either case, you'll need to go through an FHA-approved lender.
Home Equity Loan
If your home is worth more than you owe on it, then you've got home equity. You can use that equity to get a loan in which your home acts as the collateral on the loan. The lender will look at the balance of your mortgage, your credit history and income, and you may be able to get a fixed interest rate with a loan that you pay back monthly.
Home Equity Line of Credit
This is similar to a home equity loan, except it's more like getting a credit card to use, in which your home is used as collateral, instead of getting all the money in one lump sum. Once you set up a home equity line of credit, you can reach into that fund as often as you like; however, it's important to remember that you're paying this back on a variable interest rate and you will also incur some additional costs as you get the loan set up.
Refinance Your Home
If you've owned your home for a while, and especially if interest rates are lower than when you purchased it, then this can be a great option for getting the money you need to renovate your home. In this option, you would have your home appraised and you'd go through an entirely new loan process that allows you to pay off your remaining mortgage. You then use the extra money (since you've paid a lot of your mortgage off, and the interest rates are lower) to finance your renovation project.
Deborah Flomberg is a theater professional, freelance writer and Denver native. Her work can be found at Examiner.com.
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