Is the linoleum in your kitchen dated and peeling? Does your sink leak into your cupboards? If so, you might be toying with the idea of a kitchen remodel. However, unless you have earmarked thousands of dollars, you’ll need to borrow money to give your kitchen a facelift.
Popular financing options for kitchen remodels include:
But which lending avenue is best? That depends on the price tag of your kitchen remodel as well as your personal finances (e.g. debt-to-income ratio, monthly budget, credit score).
In this guide, we provide more information about each financing option so that you can find the right fit for you.
Personal loans are financed by a financial institution like a bank or credit union. They’re fairly straightforward and easy to secure, at least compared to other types of loans. However, they can carry higher interest rates.
Consider these pros and cons of personal loans:
If you have a credit card with a high enough line of credit, you could use it to fund your kitchen facelift. However, whether or not this is a smart choice depends on several factors, including:
Do you think a credit card could be the right financing tool for you? Before racking up consumer debt, consider these pros and cons:
If you owe less on your home than its current market value, you may consider a cash-out refinance. A cash-out refinance allows you to take out a larger mortgage. This new loan pays off your original mortgage. You then pocket the difference.
Though refinancing is a savvy tool, you risk losing your home if you cannot afford your new monthly payments. Other factors to consider include:
Homeowners may also consider a home equity line of credit (HELOC for short). A HELOC is similar to a home equity loan, but instead of receiving a lump sum, you’re essentially granted a revolving line of credit. That means you can borrow only what you need.
If you think a HELOC might be for you, consider these pros and cons:
Many government agencies offer home improvement loans for borrowers with less-than-perfect credit. Since these loans are backed by a federal agency, they have very low interest rates and are worth exploring, even if you qualify for other financing options.
For example, the Federal Housing Administration (FHA) offers two renovation programs for low- to moderate-income homeowners:
Home improvement grants are also issued by the government at the federal, state, and local levels. This financial assistance helps low-income homeowners make improvements to their properties. For example, the VA Specially Adapted Housing Grant helps disabled veterans modify their homes to be more accessible.
As long as you meet the requirements for a home improvement grant, you don’t have to repay the money.
Because remodeling a kitchen is expensive, many financial institutions have lending programs specifically designed for home renovations. However, you should always carefully review the terms of any loan. Some banks and credit unions charge ridiculously high interest rates. Others have clauses that allow them to adjust your “teaser” rate after a set amount of time.
As a trusted general contractor in Charlotte, Portico can guide you through your kitchen remodel. We understand that securing financing can be a nightmare and want to help alleviate some of that stress.
Want to learn more? Contact Portico today!