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Paying For Your Home Improvement Project

By Sky, K-Staff

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Are those dated walls starting to close in around you? It might be time for a home improvement project! But, how to pay for it…

Home upgrade projects can cost an average of $6,649, and if you don’t have that cash on-hand, figuring out financing can be a tough decision. Luckily, there are several options out there to fund your next project, big or small, and picking the right one is easier than color-coordinating your wall color to the new hard wood floors. Plan out your project, make—and stick to—a budget, and find the right financing option for a successful project.

Using a low-interest credit card

This is a great option if you have a smaller home improvement project. Using a card with a low interest rate or getting a new card with a low or zero percent introductory rate can save you a lot of money. Introductory periods can be 12 to 18 months, so if your project isn’t overly large, you can budget to pay the balance off in that introductory period. Just make sure to read the fine print! Many low introductory periods can hit you with a lot of interest if you’re still carrying the balance when the period ends. Aside from the ease of paying with a credit card, not having to put up any collateral is a benefit of this method. The Independence Credit card from Kirtland FCU offers great low rates, and you could even earn 1.5% cash back on your purchases when you enroll in the cash-back rewards program.

Using a personal loan

If you’re taking on a heftier project than just some paint or new appliances, a personal loan may be the way to go. If you’re planning a project that will cost somewhere between $15,000 and $50,000, this may be a good option. Personal loans do tend to have higher interest rates depending on the lender, making it a good idea to shop around before settling on a loan. You will have a longer period to pay off the loan, usually around 3-5 years depending on the terms of the loan. A personal loan from Kirtland FCU offers rates as low as 8.99% APR with terms up to 60 months.

Using a home equity loan

Own your home? You can tap into your home’s value—it’s equity—to finance your projects with a home equity loan or line-of-credit. A home equity loan is a secondary mortgage you can take out on your home. You’ll make equal payments over a set number of years. Home equity loans are limited based on your home’s worth. Home equity loans from Kirtland FCU, for example, are limited to 90% loan-to-value. That means if home is worth $200,000, and you’ve paid your mortgage down to $100,000, you’ll be able to take out a maximum of $95,000. This, of course, depends on several other factors as well, including your income and credit score.

Home equity loans are great for large scale renovations or remodels. There are several advantages that some with home equity loans, including:

  • A larger amount of funding
  • Low interest rates
  • Tax deductions and incentives may be available, consult your tax advisor for your opportunities

 

There are also some risks associated with home equity loans. You’ll reduce your equity if you take out a home equity loan; there may be several fees associated with this method including application fees, prepayment fees, appraisal fees, late fees, and credit reporting fees. At Kirtland FCU, home equity loans have no closing costs!

With a home equity loan, you’ll be paying over a much longer period than a traditional loan, and your home could be at risk if you can’t make the payments. Discuss your options with a Member Experience Specialist.

Using a home equity line of credit

A home equity line-of-credit or HELOC is a line of credit that’s secured by your home. Like a home equity loan, the equity in your home will determine how much you can borrow. This option works a lot like a credit card since you’ll have a revolving line of credit—that means you borrow and pay interest on only what you draw (or borrow), rather than a single lump sum draw with a loan which requires payments on the full amount after funding. HELOCs often have a variable interest rate, an important distinction from a lump-sum loan.

Whether it’s replacing that old leaky toilet, updating and upgrading the kitchen, or a total home remodel, there’s a financing solution that’s best for you!

*APR=Annual Percentage Rate. Actual rate varies based on creditworthiness and other factors. See a representative for complete details. Interest may be tax-deductible; consult your tax advisor.

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