The simple truth is that investing in a home renovation isn’t cheap, even if you’re only doing one room. For a full home transformation, you can expect the price of the work to reflect the significance of improving your home on such a big level. It isn’t uncommon for a full transformation to cost $100,000 or more. Even smaller home renovations can come out to be tens of thousands of dollars.
Being realistic about the price is very important. All too often, people walk into a meeting expecting something to cost a few thousand dollars and end up surprised by the total cost after they have picked out all of the bells and whistles. A home transformation is very exciting, but it does come at a high price point, so you will want to be realistic about how you intend to pay for it.
Why You Need to Think About Funding
The simple truth is that investing in a home renovation isn’t cheap, even if you’re only doing one room. For a full home transformation, you can expect the price of the work to reflect the significance of improving your home on such a big level. It isn’t uncommon for a full transformation to cost $100,000 or more. Even smaller home renovations can come out to be tens of thousands of dollars.
Being realistic about the price is very important. All too often, people walk into a meeting expecting something to cost a few thousand dollars and end up surprised by the total cost after they have picked out all of the bells and whistles. A home transformation is very exciting, but it does come at a high price point, so you will want to be realistic about how you intend to pay for it.
Popular Ways to Pay
1. Pay for it in Cash
At KHB Construction, we have a saying: cash is king. When you’re investing in a renovation, paying in cash is without a doubt the best way to go—and it makes your general contractors very happy as well. When we see someone who is ready to pay for a home transformation in cash, we know that they have really thought through the investment, and actively saved up for it. It means that you have personally considered what you want and how much it should cost.
Paying in cash is the best way to pay for your home improvement projects because it means that there won’t be any additional fees or expenses. If you know your exact budget and have put in the work to set it aside, we can help you to perfectly stay within your renovation budget—and you never have to worry about paying interest on your investment. It’s the simplest way to pay for a renovation, and we highly encourage you to take this route.
2. Cash-Out Refinance
We understand that you might prefer to pay for your home transformation over time, especially if you’re choosing some of our more expensive materials and offerings. It wouldn’t be realistic to expect everyone to save up the money in advance, and we believe that the cash-out refinance option is definitely one of the best options available.
The most important thing to understand about using the cash-out refinance method is the fact that it is not a secondary loan. When you refinance to cover the expenses, you’re actually taking out of the equity in your home to cover it. This means that rather than adding an additional secondary loan, you are actually tacking on the new amount to the back of your existing loan. You will continue to make your monthly payments on that loan in the way that you have agreed upon with your lender.
The real benefit of this kind of loan is the fact that it makes it possible for you to have a very safe loan option. Since it isn’t a secondary loan, it is easier to manage and can be handled fairly quickly. People really appreciate the simplicity of this approach, and it can feel like a less significant investment.
Right now, this is one of the most popular ways to finance a home renovation. Every day, more people are coming in with this strategy to invest in their home transformations, and the responses have been generally positive for this approach. At this point, in 2022, the rates are looking great, making it much easier for people to comfortably choose this option.
3. Home Equity Line of Credit
A home equity line of credit is easy to confuse with a cash-out refinance because both involve the equity of your home. In this case, however, you are taking out secondary home equity loans. This means that you will receive an entire second home equity loan to manage—and this is subject to approval.
Using this approach is very popular during times when equity is high, like right now. The value of homes is increasing, allowing more people to comfortably take out loans against the equity in their homes. During times when equity is low, this really won’t be a good approach to finance your home transformation.
This loan is entirely separate from your existing mortgage and will need to be handled independently. However, it does tie into your equity because it is leveraged against your home. This can help you to gain approval, and it is also just a good way to obtain the money to invest in your dream home transformation.
4. A Personal Loan or A Construction Loan
Kitchen remodel loans are good options to have as a final backup, but they are not considered to be one of the best ways to finance a home renovation. Each of these types of loans will stand completely separate from your mortgage, and they must be obtained through the use of a third party. A personal loan is easy to obtain if you have a decent credit history and credit score.
Personal loans are the faster option of the two. They allow you to apply quickly—and approval can be almost immediate in the right circumstances. We consider these to be one of the “quick cash” methods—because that is what personal loans are. Personal loan lenders will give you a home improvement loan to meet your needs, and then you can pay us directly with the cash that you receive. These loans come in all shapes and sizes, and the rates can vary from one lending company to the next. You can use your loan to pay the construction company via a monthly payment depending on the overall cost of your home improvements.
Construction loans are more complicated than a standard personal kitchen remodel loan. These loans are often harder to get approved for and can come with quite a few hoops to jump through. Once again, they are a type of secondary loan, but they’re a little more specific. These loans are most commonly used in the event that your home faces some kind of disaster that insurance won’t cover.
The sad truth is that when disaster strikes, insurance companies don’t always have your back. More often than not, when faced with significant damage, homeowners can find themselves grappling to squeeze money out of their insurance companies, despite the loan terms. Realistically, they do not always offer the amount of money that you will need to remodel or fix up your home. Construction loans provide a valuable backup option. Fire damage, water damage, or any other kind of restoration can be covered by these loans.
When in Doubt, Pay in Cash
When we help you with a home transformation, we make the same amount of money regardless of how you pay. We have no personal stake in the way that you fund your home renovations, but we do have to point out the obvious—cash is king.
Paying for your home renovation in cash is, without a doubt, the smartest way to finance your home transformation. It might mean waiting before you invest in your big remodel, but it also means that you can spend a much smaller amount of money in the long run via monthly payments. Home renovations are expensive, but they get even more expensive when you choose a financing option. To avoid the added expenses and hassle, start saving early and try to be patient.
The Takeaway
Home transformations can take your home and turn it into a treasured space that you will love. They make standard homes into forever homes, and we love our work for that reason. Before you start deciding on what countertops you want or what color you want your walls to be, take the time to sit down and strongly consider your financial options.
Taking the time to save up for a home renovation can give you something to look forward to—and it means that you never spend a penny more than you have to. Of course, we are happy to help make your dream home possible no matter what method you choose!