Thursday 25 April 2024
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Financing Options for Your Home Addition Dream Project

Financing Options for Your Home Addition Dream Project

Home additions allow homeowners to expand their living space as well as property value, simultaneously. It doesn’t matter if you add an extra bedroom, a bigger kitchen or storage space. The homeowners will need to plan it out properly as well as consider different costs including the cost of hiring a contractor, buying materials, permit fees, and labor cost. This can turn out to be an expensive project for several homeowners if they don’t have sufficient savings.

Fortunately, homeowners can consider several financing options but first, they will need to determine the overall project cost. Consult a reliable engineer or get an estimation from 3 to 4 contractors. You can compare the quotes and then decide wisely. It gives you an idea of the final figure to look for but add a small amount for emergencies. The next thing will be to check your savings. Now, calculate the amount necessary to be borrowed.

Home equity loans

It can be regarded as a second mortgage, where equity of your home is kept as loan collateral. The interest rate is high, so you can secure loans for home additions easily. Lenders consider this as a safe investment, so offer a maximum of 90% on house value. Repayment terms can be spread in instalments of 10 to 20 years.

 If you are certain to make payments regularly, then consider this financing option or you can lose your home.

Cash-out equity refinancing

If your home extension project investment is huge then this is a great option. You apply for a huge loan amount, which helps to pay the existing mortgage and you have sufficient cash left to finance home extension. Check to get low-interest rates or better repayment terms.

Credit cards

A credit card is a convenient way to finance your addition project, especially when you need low amounts. First, ensure that you have enough liquidity for paying the monthly credit bill without delay. If necessary, a personal loan can help you pay the credit bill on time.

Personal loan

On personal loans, you can get suitable repayment terms. This is a great option, which will help to finance your addition project without any risk of losing your home. The lenders will do a check of your credit scores, current repayment capacity as well as a debt-to-equity ratio. First, ensure that all these aspects are good before applying for a personal loan.