If you own a home, you know there is no shortage of potential weekend projects that can keep you busy throughout the years. As you plan your home improvement to-do list, you’ll no doubt begin to see the updates, renovations, and maintenance project costs add up. But finding the money to cover these costs may not be as difficult as you think. Before you put off the deck repairs or master bathroom upgrade for another year, consider these options for funding your next project.
1. Pay cash.
Saving cash to cover a project outright is the most financially responsible way to pay for home improvements. Gather two to three quotes from various contractors to give yourself a saving’s goal. With a target in mind, you can begin to make small changes in your everyday spending habits. Cut down on eating out and consider carpooling with a coworker. You’ll be surprised at how quickly you’ll see extra cash in your account each month. While you’re saving for the project, create a detailed plan for renovation to ensure the end result will be exactly what you want. Once you have saved enough, using cash to pay for the project will deliver peace of mind. You’ll rest easy knowing there are no payments toward an interest-generating loan in your future. Don’t forget to keep an emergency fund for the recommended three-to-six months of living expenses after paying for the project.
2. Open a home equity loan or line of credit.
Home equity is calculated by taking the value of your home and subtracting the total amount you owe on all mortgages. With a home equity loan, you receive the money you’re borrowing in a lump-sum payment. It usually has a fixed rate and is often best for large, one-time expenses like a new roof. Alternatively, a home equity line of credit operates more like a credit card. You can draw money as needed from an available maximum amount. This is ideal for ongoing expenses that require spending flexibility.