3 Home Improvement Loans That Save The Most Money


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A home improvement project is a huge endeavor. Whether you’re expanding an area for new living situations, fixing safety issues, or providing increased comfort, several factors come into play. 

A homeowner’s biggest challenge is figuring out the cost and how to pay for it. In 2022, Americans’ expenditures on home improvement and repair projects reached $567 billion, indicating a notable 15 percent increase. 

Are you planning a major upgrade or renovation project for your home? In this article, we’ll help you understand the financial realities of this undertaking and the most cost-effective options available to fund it. 

The Importance of Financial Planning in Home Improvements

Most home improvement projects take longer than initially planned. Likewise, they’re likely to exceed the initial estimated cost. So before starting any home improvement project, careful financial planning is crucial to avoid future unexpected expenses and economic problems. 

No matter how small or big the project is, create a thoughtful budget, covering the hard and soft costs and contingency expenses. This will help you focus on your priorities and prevent overspending on your home improvements.

Thinking ahead about how to fund your home improvement project will also put you in a better position to save money. Remember that there’s no one-size-fits-all answer to how you pay for a home improvement project, as it will depend on your circumstances. 

Ideally, tapping into your savings is the most economical choice, as you don’t have to pay for interest charges, origination fees, or repayment periods. This option, however, may not be feasible if your home needs significant repairs or an extensive remodel. 

Thankfully, numerous financing options are available to accomplish these goals. 

3 Money-Saving Home Improvement Loans 

There are different types of loans to finance your home improvement project. But here’s a list of financing choices that will help you save the most money. 

1. Home Equity Loan

Homeowners can take out a loan using the equity in their homes. Equity refers to the value of your home minus the amount you owe on your mortgage. Suppose your home is worth $320,000, and you have a mortgage balance of $240,000. In this case, your home represents $80,000 in equity. 

A home equity loan enables homeowners to borrow a lump sum upfront, typically at a low and fixed interest rate over a predetermined period. The repayment term of home equity loans primarily extends between 5 to 30 years, depending on the amount you borrow. 

Although there are restrictions, the interest paid on home equity loans is tax-deductible in most cases. This gives you a chance to lower the overall cost of the loan and save extra money on your home improvement projects. 

2. Home Equity Line of Credit

Another low-cost borrowing option for home renovations is tapping your home equity through a line of credit. Commonly known as a home equity line of credit (HELOC), this financing option is backed by your home, allowing you to borrow money for a lower interest rate. 

But unlike home equity loans, HELOCs operate like credit cards. It’s a revolving line of credit where you have the flexibility to borrow up to an approved limit as you repay the outstanding balance. But most HELOCs have variable interest rates, which will fluctuate and affect your monthly payments. 

Conversely, you only pay interest on the amount you draw instead of your total credit line. Suppose your project runs under budget. You won’t have to incur interest on unused funds. This flexibility helps you stay on budget for your home improvement projects, as you only take the necessary amount. 

3. Personal Loan

Applying for a secured loan can be challenging if your home has no or little equity. Suppose you’re a new homeowner looking to fund a home improvement project or want to use something other than your equity. A personal loan is a good choice if you have enough cash to repay monthly. 

Typically, all personal loans have fixed interest rates and repayment periods. After receiving the loan in a lump sum, your monthly payment will be consistent throughout your loan term, which often ranges from 12 to 60 months. 

But since personal loans are not backed by your home as collateral, the interest rate can be slightly higher. The significant advantage is that you don’t risk losing your home if you miss a payment or default on the loan. 

Be Financially Prepared For Your Next Home Improvement Project

The financial realities of making home improvements can feel daunting if you’re not adequately prepared for them. Before embarking on this project, assess your financial situation to ensure it won’t strain your budget. 

Typically, the cost of home improvements will differ depending on the size and scope of your project. Hence, take the time to research contractors, material costs, and financing options. When determining the most cost-effective financing, talk to multiple lenders to secure the best possible terms.