Top 5 Ways to Finance Renovations for Your Home.

Most people renovate their homes to bring a fresh look or increase value for reselling. However, the common challenge associated with home renovations is financing the project. The funds required will vary based on the project size and your current financial status. There are many ways to finance renovations for your home, as explained below:

1. Home renovation loan

You can qualify for a home renovation loan from different lenders. Most of these loans are unsecured, meaning that your house won't be collateral. Lenders will analyze your credit score to determine how much you qualify and the ideal interest rate. The repayment period is also short compared to typical home loans. However, expect to pay higher interest rates.

2. Savings

Financing your home renovations through your savings is the safest choice you can consider. Since it's your own money, you won't avoid paying interests and other frustrations that come with loan applications, including your credit rating, among other requirements. The only downside of this financing option is that you might have to wait longer before the renovations start depending on the project size. Savings will work better for homeowners who aren't in a hurry.

3. Cash-out refinance

This is a viable home renovation financing option where the borrower qualifies for a larger mortgage than the existing one. The borrower will get the difference between the two and gets a new interest rate and repayment duration. The downside of using this option is that your home loan will take pretty long, and you'll incur higher closing costs. However, if you take advantage of the DPA, you can easily pay these closing costs.

4. Home equity loan

This home renovation financing option is similar to a second mortgage. The best thing about these loans is that if you qualify, you'll get all funds upfront to begin your renovation project. Again, the interest rates won't be affected by market fluctuations over the entire loan repayment period. The only downside of home equity loans is that defaulting on payments risks home foreclosure.

5. HELOC

A home equity line of credit is another best home renovation financing option. It's a form of a secured loan where the borrower uses his home as collateral. You can qualify for a high limit depending on your overall renovation costs. Since it's a secured loan, you pay lower interest. The only downside of HELOC is the increased risk of foreclosure if you default on payments.

In conclusion, these are the top ways to finance renovations for your home. You can also use your credit card or apply for government loans which typically have better terms.