Life on Credit

The art of borrowing money

  • Home
  • About Samantha
  • Contact

Doing a Reno? What Are the Best Ways to Finance It?

October 23, 2017 By Samantha 2 Comments

There are different ways to finance a reno, whether you want to upgrade your kitchen or dining room or have another home improvement project in mind. You can use cash or apply for a secured or unsecured loan, home equity line of credit, or another financial solution depending on your project requirements, amount of cash, scope, etc. Large products require more cash and fortunately, banks have plenty on offer. Solutions to look into include reverse mortgages, home equity loans, and more.

Use Cash

If you need a small amount of money and have an emergency fund, then you can use cash for your project. If you are short of money, then you may want to go through your assets and belongings and sell items that you no longer need.

Use Low or Zero Interest Card for a Small Reno Project

If you want to reinvent a room or remodel the kitchen, one idea is to use a low or zero interest card with a large limit. The same goes for things like repainting the interior, replacing the plumbing, routine maintenance, and other basic, less expensive updates. If this is the case, a low interest card can be a good choice to benefit from the low promotional rate. Keep in mind that the promotional period is usually over in 6 – 12 months, and a standard rate applies afterwards. The main benefit is the low cost. However, there are no tax benefits and the payback period is much shorter than conventional credit.

Apply for a Personal or Unsecured Loan for a Medium-Sized Project

Examples of medium-sized projects include roof repairs, adding energy-efficient insulation, deck or bathroom addition, etc. You may want to apply for a personal or unsecured loan to finance your home improvement project if you need between $15,000 and $50,000. Credit unions, banks, peer to peer lenders, and other providers offer unsecured financing. The main advantage for borrowers is that this is a low-risk solution compared to secured loans, which require collateral. Unsecured loans usually go with higher rates because of the added risk for financial institutions. At the same time, you benefit from quicker approval compared to secured options. The reason is that with secured financing banks require a validation of the security or collateral, which takes time.

When it comes to interest rates, customers with spotless credit and steady, high income are offered better terms and rates of about 7 – 9 percent. Those with tarnished credit may actually see their application rejected.

The main benefits include a longer repayment period, lower rates compared to credit cards, and no processing fees and closing costs. On the downside, there are no tax benefits that you normally get with a home loan.

Apply for a Secured Loan for a Large Home Renovation Project

A secured loan is a good choice if you need $50,000 or more. If you have a major home renovation project in mind, then you may want to apply for a secured loan. This is especially true for properties that are not habitable, homes in need of conversion, and derelict properties. In this case, you will need money for things like design and survey fees, purchase costs (materials), and the renovation work itself. A large home renovation project can cost a lot of money. Many banks offer large loans but require collateral to ensure repayment. Depending on the amount requested, your credit score, and other factors, the collateral can be in the form of real estate, vehicle, home, vacation home, etc. While you risk losing the asset in case of default, you benefit from more affordable payments and a lower interest rate of 3 – 4 percent.

Cash-Out Refinance

This is a type of mortgage refinancing and another way to pay for your renovation project. Borrowers refinance to obtain more money, and equity is extracted as a result of this. People usually resort to cash-out refinance to buy assets of value or pay down personal loans, cards, and other types of consumer debt. How does it work? Suppose you owe $60,000 on a property worth $320,000. If you need $40,000, then you are free to refinance for $100,000. You will get $40,000 in cash while $60,000 is the outstanding balance. To prove that you qualify, you will be asked to provide information about your debts, assets, income, and so on.

While this is one way to free up cash, there are downsides to consider such as higher than average interest rates.

Home Equity Line of Credit

This is a type of adjustable mortgage whereby the interest rate moves up and down with rate fluctuations. If the rate suddenly skyrockets, you will end up paying a lot of money. The main benefit is the fact that there are no closing costs, and you are free to draw on the line as many times as you need to. Still, there is risk involved if you opt for a HELOC.

Reverse Mortgage

A reverse mortgage is an alternative to consider if you are 62 years old or older. In this case, borrowers are free to draw cash to finance projects, make purchases, go on vacation, or anything else. There are no monthly payments to worry about, but owners are still required to pay homeowner’s insurance and property taxes.

Filed Under: Banking, Mortgages, Personal Loans, Savings Tagged With: finance renovation, loan for renovation, reno, renovation, secured loan, unsecured loan

Comments

  1. kris man says

    October 23, 2017 at 7:39 pm

    I took a HELOC last summer to redo my kitchen. The best decision I even made! My kitchen is new and my home value increased.

    Reply
  2. danby says

    November 6, 2017 at 12:03 am

    My bathroom desperately needs a reno. I need around $10000. Shall I put everything on my credit card or shall I get a loan?

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular Posts

Top 6 Credit Cards for Bad Credit in Canada
Bad Credit Personal Loans in Canada
Top 6 Secured Credit Cards for Canadians
Top 12 Best Credit Cards in Canada

Refresh Secured Card – No Credit Check

Secured Credit Card

This card is owned and issued by Digital Commerce Bank pursuant to license by Visa International. Use of the card is governed by the agreement under which it is issued. The Visa Brand is a registered trademark of Visa International. All credit and approvals are provided by Refresh Card Solutions Inc. Digital Commerce Bank provides no credit or loans. All funding and lending for this program is provided by Refresh Card Solutions Inc.

Recent Posts

  • Secured Credit Cards – Canadian Edition 2021 March 16, 2021
  • What Is Driving up the Prices in Cottage Country? February 17, 2021
  • Budgeting for Back to School September 9, 2020
  • Top 6 Credit Cards for Bad Credit in Canada 2020 August 20, 2020
  • Choosing a Credit Card That Is Right for You July 3, 2020

Categories

  • Auto Loans
  • Bad Credit Car Loans
  • Bad Credit Loans
  • Banking
  • Credit Cards
  • Debt Consolidation Loans
  • Insurance
  • Investing
  • Mortgages
  • Payday Loans
  • Personal Loans
  • Savings
  • Student Loans
  • Uncategorized

Tags

air miles auto loans bad credit bad credit car loans balance transfer balance transfer credit cards banking borrow budget car insurance car loans cashback credit cards cash back credit cards credit credit card credit cards Credit Cards for Bad Credit credit score debt debt consolidation insurance investing loan loans Low Interest Credit Cards money money management mortgage mortgage with bad credit no fee credit cards Prepaid Credit Cards real estate rewards rewards credit cards rewards points savings secured credit secured credit card Secured Credit Cards spending student credit cards travel travel credit card unsecured loans vacation

Recent Comments

  • Greg on What Is Driving up the Prices in Cottage Country?
  • Pang on What Is Driving up the Prices in Cottage Country?
  • Krissy W. on Top 6 Credit Cards for Bad Credit in Canada 2020
  • Jeff on Secured Credit Cards – Canadian Edition 2021
  • Jeff on Secured Credit Cards – Canadian Edition 2021

Copyright © 2025 · Samantha Preston