Fund Your Home Improvements

Many homeowners have a long wish list of projects to improve their home. These projects include kitchen renovations, adding a deck, light fixtures; or maybe installing a heating system. Here's how you can finance your next home improvement project.

According to, here are 11 options on funding your next home improvement project:

Cash: This is obviously the easiest and best way to cover the costs of home improvements. You won't have future payments and you won't encumber the equity on your home. Take on safety improvements first, but otherwise prioritize what you feel is most important and can afford.

Refinance your mortgage: This is the best option for homeowners who would benefit from refinancing anyway, perhaps with a lower interest rate, as long as they don't spread the cost of the improvements over more years than the renovation will last. The average rate for a 30-year mortgage in the last week was 3.9 percent and the average rate for a 15-year mortgage was 3.1 percent, according to Freddie Mac's Primary Mortgage Market Survey.

Home equity loan: With a home equity loan, you borrow a fixed amount and pay a fixed payment over a certain amount of time. A 15-year term is typical, but with some lenders you can go as short as five years and as long as 30 years. "A home equity loan is the best option only if you're allergic to adjustable rates," Fleming says. "It's still cheaper than a construction loan."'s average was 5.22 percent for a fixed-rate home equity loan.

Construction loan: A construction loan is used to build a house or make major renovations. It might be worth considering if, for example, you are building a major addition that will cost more than the equity you have in your home. Those loans are not always easy to find, and they come with a lot of requirements.

Credit cards: You might be able to cover a smaller renovation on your credit cards, or at least use them for the materials, though most cards charge a fee for cash advances.

Reverse mortgage: If you are 62 or older, you can get a reverse mortgage based on a percentage of the equity that you have in your home. These loans are more expensive than refinancing or home equity loans, but you aren't required to pay them back until the home is sold or you move.

Contractor financing: While some contractors have relationships with finance companies and will offer to help arrange funding for your project, that's generally not a good idea. The truth is you can almost always do better securing your own financing.



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