Home remodeling is a great idea - if you have the money

There are various effective ways to fund your home remodeling

The explosive growth of the housing market in the last few years has enriched many existing homeowners, who have seen the equity in their property rise to unprecedented levels. That’s great for homeowners who are happy with their homes and plan to stay in them for the foreseeable future. But for those homeowners who are not happy with their homes - they have outgrown them, they want a larger garage or recreation area, the increase in housing prices has become limiting. It may cost you more than you can afford to move to a larger house.

For some people, the obvious answer is to remodel the existing house. You can turn an older kitchen with paneling, wrought iron and Harvest Gold appliances into a new, modern 21st century cooking paradise. Or you can add that gameroom or den that you have always wanted. But that takes money, too. How can you fund those sorts of additions or modifications?

Listed below, with good points and bad, are a few ways to fund home remodeling:

Credit cards - Ordinarily, credit cards might be seen as a poor choice for funding an add-on to your home. And generally, we would agree. But there are times when a credit card might be the best tool. Credit card companies occasionally offer introductory “teaser” interest rates for new customers. They often extend those offers, which can have interest rates as low as 0% to balance transfers from other accounts. If you have such an offer and the amount of money involved is a reasonable amount that you can pay off before the teaser rate expires, a credit card may be your best bet.

Credit through home improvement stores - We know of someone who needed to finish his basement and thought it might take a couple of years to do by himself. Then he saw an ad in the paper by Home Depot that pointed out that if he made a purchase over a certain amount, Home Depot would allow him to put off payment, interest-free, for 18 months! He went right down to the store and purchased thousands of dollars worth of building materials and had it delivered right away. If your credit is good and you can make the payments when they come due, a deal like this is hard to overlook, and they pop up fairly often at home improvement stores.

Home equity loan - This one is probably what most people think of first. If you have that increased equity from the huge market upswing of the last few years, why not put it to work? A home equity loan lets you borrow by using your home as your collateral. The interest rates tend to be favorable and fixed, and you will have a set repayment schedule over a fixed period of time. Even better - the interest on a home equity loan is tax deductible. The only downside is that you are now putting your house at risk if you fail to repay. 

These are but a few of the options available to those looking to add on or remodel their homes. We will look at a few other options in part two of this article.