An entire home renovation or stucco repair project with a home renovation contractor can be expensive. Turning your dream home into your reality home requires thought and planning. Thankfully, there are several options to pay for a whole-home remodeling project, depending on your unique situation. Here’s a list of the top five ways to pay for a home renovation project near Downingtown, PA.
Save Up and Pay Cash
Using cash is the most straightforward option to pay for home renovations. You will not increase your overall debt and will not pay fees on loans, much less interest. If that’s your choice, you can begin saving by putting yourself on an automated savings schedule. And, you can even consider keeping your funds in a high-yield savings account.
However, it’s not wise to fully deplete your savings to renovate your home because maintaining a healthy emergency fund is important.
Get a HELOC (Home equity line of credit)
If you can’t or don’t want to pay with cash, a home equity loan or line of credit is generally the most affordable financing option, as long as you qualify. Interest rates will usually be lower since your home secures the loan as collateral. A HELOC works like a secured credit card, with a revolving line of credit up to a defined maximum. That means you can take what you need when you need it. Depending on your credit score and the value of your home, a HELOC can be issued for up to 85% of your home’s value.
Take Out a Home Equity Loan
Another option to consider is a home equity loan, which many refer to as a second mortgage.
Home equity loans and HELOCs are based on home equity but operate very differently. With a home equity loan, the amount you’re borrowing is paid out in a lump sum, like a personal loan. Your interest rate is fixed, and you have a certain amount of time to repay the loan.
Like a HELOC, this loan uses your home as collateral; the lender can repossess it if you default. The downside to a home equity loan is that you would need more payment flexibility with a HELOC. With a home equity loan, you have to take out a significant sum all at once; with a HELOC, you can borrow and make payments as you go.
Consider a Cash-Out Refinance
A cash-out refinance is when you replace your original mortgage with a new one. If the new mortgage is worth more than what you owe on your house, you can pocket the difference. You can use those extra funds to pay for your home improvements but can only do a cash-out refinance if you have enough equity in your home.
If you’re considering refinancing, consider the drawbacks. Because you’re resetting the terms of your mortgage, you’ll have to pay closing costs, such as appraisal, origination fees, and taxes. Remember that those costs can be rolled into the loan, so you may not have to come up with the money upfront.
Look Into Rebates and Tax Credits to Pay for a Home Renovation
There are some rebates and tax credits available through energy-efficiency programs, but the actual amounts depend on your annual income and location. Always be sure to consult with a tax professional to ensure your taxes and credit claims are done correctly.
Inflation Reduction Act of 2022
As part of the Inflation Reduction Act of 2022, there are federal income tax credits available for homeowners who improve the energy efficiency of their home. The credits can provide up to $3,200 annually to lower the cost of the upgrades by up to 30%. Improvements include exterior renovations including insulation, doors, windows, home energy audits, and more.
Schedule a Consultation With Precision Contracting Services, LLC
It can feel like a big to-do when it’s time to remodel. At Precision Contracting Services, LLC in Downingtown, PA, we’re home renovation contractors and James Hardie certified installers dedicated to helping homeowners avoid future costs and damages. We guarantee 100% impenetrable exteriors and exquisite design and execution down to the last nail. We know what’s best when it comes to new roofing, James Hardie siding, windows, or doors for your home. We will ensure that your home will be up to current standards with excellent moisture-control systems at an affordable price.
So if you’re in the search for ‘residential siding contractors near me’, keep us top of mind. Call us at 610-225-0112 or complete the form on this page here to schedule a consultation with our team. We’re looking forward to hearing about your project and helping you find the best way to pay for a home renovation project!
Want to learn more about home energy efficiency in Pennsylvania? Check out our Ultimate Guide to Remodeling Your Luxury Home.