Approximately one-third of homeowners on Houzz have renovated their homes. With the interest in home improvement ramping up, it is no surprise that home improvement is the fastest-growing retail category right now. While the average homeowner has spent Rs. 3,00,000 on their home improvement projects, some home improvement plans can cost much more. For instance, installing hardwood flooring in your home can cost between Rs. 650 and Rs. 5,000 per square foot. When financing your home improvement projects by cash is not possible, it is time to consider your financing options.
Home Renovation Payment Plans
Whether you opt to refinance or use a credit card, here are a few ways you can pay for your home renovation plans this year.
01. Refinance for Your Renovation Plans
With the low-interest rate regime set to continue, this could be an ideal time to refinance your home. Refinancing your home can give you access to the financing you need home improvements and work out cheaper in the long run, thanks to lower interest rates. Knowing when to refinance mortgage for a loan depends heavily on your credit score and household’s ability to handle a bigger mortgage. Most lenders look for a credit score of at least 620.
To get a glimpse of the average interest rates, you may be offered using your current credit score, use a refinancing mortgage calculator. Consumers that are unaware of their credit score can request a free copy of their credit report online. Lastly, keep in mind that you will have to repay closing costs if you refinance. In the end, the lower mortgage rate and more favourable terms should not bring just a short-term inflow of cash. It should be a manageable mortgage with which you can keep up with, in the years ahead.
02. Apply for a Home Renovation Loan
An alternative option for financing your home improvements is to apply for a home renovation loan. According to a report by CASHe, loan demand was at its highest in 2020, fuelled by a surge in home renovation loans post lockdown. Currently, interest rates for a home improvement loan start at 6.85 percent and can go as high as 10.99 percent per annum with up to a 30-year tenure.
When applying for a home renovation loan, beware of terms and conditions such as prepayment penalties. Home renovation loans also come with standard processing fees and additional eligibility criteria. For instance, the maximum loan amount for a renovation loan is 2 times your total annual salary. If the cost of your home improvements exceeds this, you will have to consider using additional funding sources like applying for a personal loan or using your savings.
03. Use a 0 Percent APR Credit Card
If you need immediate cash for your home improvements or want to avoid the lengthier application process for a renovation loan, a 0 percent APR credit card could be a good option. Many credit card lenders are now offering different introductory offers, including promotional zero percent purchase periods or zero percent on balance transfers. However, it is recommended that you only apply if you can afford to repay the balance before the promotional period expires. If you cannot, you will have to contend with high-interest rate charges every month.
A final tip: Before you planning on home improvements financing options, be clear on how much you will need for your project. Map out a renovation budget and ensure that you can afford to make the payments, regardless of your choice of financing. There is a long list of financing options out there for any home improvement plans you may have. The trick is, finding the right one for you and your home.