As the heart of the home, your kitchen is one of the first places to think about remodeling. An appealing kitchen not only feels great and makes cooking more efficent, but it also raises the value of your property. Although one downside to renovating is that unless you plan on selling your home immediately, you can't expect any monetary return from it. So at times it may seem like you're just sinking funds into a project with cash flowing in just one direction. Also, a kitchen remodel can be pretty pricey. Flood Safety states that financing your kitchen makeover is not all doom and gloom though. Here are a couple of financing options when it comes specifically to kitchen remodel loans, as well as a few tricks to cut costs.
Ways to Get Your Dream Kitchen
#1. Use Your Home's Equity To Get A Loan
This option requires you using your home as collateral. It's sort of risky in that you could lose your home if you fail to meet any payment deadline. Here are two ways to finance your kitchen renovation by using your home as collateral:
- Home Equity Loan
With HEL, you will be receiving a lump sum of cash, in exchange of forfeiting your home if you default on your payment. It's essentially like taking out a second mortgage. The good thing about this is that HELs have fixed and not fluctuating interest rates, and could be tax deductible - if you play your cards right.
- Home Equity Line Of Credit
Also known as HELOC. Unlike HEL, you don't receive a lump sump of cash, but rather small sums over an extended period of time. Like a credit card.
It's one of the most popular financing options for those renovating their homes - mostly because the interest charged is solely on the amount you withdrew. That is, they don't charge you for the sum available to you but for the money you actually withdraw. Talk about a good deal.
Qualifying for this loan is a bit more technical. You need to have loan-to-value ratio of at least 70%. Which is the amount of mortgage left unpaid divided by the value of the home. Meaning you'll need to have paid off a good amount of your mortgage to qualify for this.
#2. Ask Your Contractor If They Have Financing Options
You can always ask your contractor if they have long term payment options. That is, they'll renovate your kitchen immediately, but accept small, pre-agreed installmental payments until the costs are fully paid up. It seems like a really great option.
The only downside is that because contractors are unique - with different pricing strategies, you may not have a similar basis to compare what they're actually charging you. I.e, they could be overcharging you on interest and you won't know.
#3. Getting a Personal Loan
All the other kitchen remodel loan options are either overly expensive or require collateral. Personal loans are considered the best way to finance that kitchen remodel project.
They're unsecured, so you don't need any collateral and your credit score won't affect your ability to get the loan. Sure the lower your score is, the higher the interest rate charged, but asides from that, you get the money in your account as soon as your application is approved.
Cutting Down Costs
As great as it will be to get that kitchen remodel loan, it's a lot better to know whether you need a complete overhaul or light retouching. To save costs, try these instead:
● Instead of buying new cabinets, consider freshening them with new hardware.
● Go for tile or wooden countertops instead of granite.
● Do It Yourself, whenever possible.
What's the Best Option For My Home?
Although there are many options for how you can achieve your dream kitchen remodel, you should always take into consideration the pros and cons of each option. Regardless, achieving your dream kitchen is definitely attainable through kitchen remodel loans.
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