Renovation Loan: The Best Way to Renovate Your Kitchen?
Is a renovation loan really the best way to renovate your kitchen? The answer actually depends on you. Factors like your skills, your time, your money and the remodeling plan all factor into the ultimate decision. Can you build cabinets? Are you adept in plumbing enough to install the faucet and garbage disposal? Is your renovation project only a toaster and refrigerator replacement?
A renovation loan is useful when the remodeling project exceeds your skills, time and money. Most of us can probably replace the hardware on our cabinets. Drawer and door handles are usually a screw or two. However, installing all new cabinets and counters takes a special skill set. It also takes a bit more money.
With renovation loans you can refinance your home and pay for the upgrades you want to do all within the same monthly mortgage payment. The additional cost is about $6 per month for every $1,000 you finance. In other words a $15,000 new kitchen would add about $90 to your refinanced mortgage payment. Your other option would likely be to finance the work with bank loans (if you have enough equity in your home) and credit cards. While a home equity loan is great if your home value hasn't dropped like the rest of the country, a renovation loan is based on the after-improved value of the house once the work is completed.
If you have the equity or cash on hand, then financing home improvements may not make sense in your situation. If you can do the work yourself and it's the quality you want, then hiring a professional and financing that work doesn't make sense for you. In these situations, avoid a renovation loan. However, if your kitchen renovation exceeds your cash, time and skills then you just want to consider the financing option.
Download "The Complete Guide to Spring Home Improvement Financing" at the button below. The free guide walks you through 10 do-it-yourself spring projects you don't need financing to do, and another 10 you might need some help completing. Learn all about home improvements and your options by clicking the button below.
(new kitchen: Flickr user Seth Woodworth)