After settling into your home, you start to notice a few things either need to be retouched or completely overhauled. The biggest issue that a lot of homeowners run into is the money for the project. Even after assessing whether the project is a DIY or you’ll need a professional, funding still comes before action. Here are a few funding options to consider before you begin your home improvement projects.
Borrow from Your Future: 401(K)
A vast number of traditionally employed homeowners have a 401(K). Often, an employer will deposit funds into this account just as the employee does, but did you know you can borrow from it? If your housing project requires a little more than what you have in your savings account, try taking a little from your 401(K). Remember, even though it’s your account, it’s not free money. You will have to put it back once you’re able, and if you separate from your current company, you may run into a few extra fees if the money isn’t returned within five (5) years.
Government-Backed Improvement Loans
There are a few different types of government-backed loans that allow you to improve your home. You just need to identify the category your home improvement falls under. If you’re looking to do a few moderate improvements, try the 203K loan. These loans are great if you’ve purchased a preexisting home and have a few hefty renovations to cover. You can even add this loan to your mortgage payments.
If your home improvement project happens to fall more along the “greener” side of things, such as heating/cooling, water-efficient landscaping, energy reduction systems, etc., you may be able to apply for a PACE loan. These loans are pretty easy to get approval for, can often receive tax credits and may be sold to your next buyer when you decide to move.
Home Equity Line of Credit (HELOC)
Have you been in your home for a while? Maybe a HELOC would be the best method for you to finance your home improvement projects. Since your home has accrued equity over the years, you’ll be able to secure the loan by using it as collateral. These loans are often suited for long renovations or projects that may require a few extra stages.
If your home improvement projects end up with a longer price tag than you were expecting, don’t fret. There are several other ways that you’ll be able to cover the cost, including tax credits and grants. If you’re prepping your home to sell in the near future, chat with your agent about the best renovations, improvements and repairs, as well as, how to fund them.