There are 6 classic ways to pay for home renovation projects:
- Cash - Got any money on hand? Cash in your pocket will always be the cheapest way of financing your home remodeling projects--no finance changes, no interest, no middlemen.
- Other Liquid Assets - Stocks and bonds and mutual funds. These are funds that can be turned into cash quickly.
- Credit Card - Obviously your remodeling project is bound by your credit limit. But you can get an awful lot done for $7,500 or $10,000.
- Home Equity Loan or Line of Credit - During the Big Home Equity Boom of the early 2000s, homeowners treated home equity loans and line like free money. Surprise: it's not. However, it is relatively low interest money.
- Sweat Equity - You put in the work yourself. Possible with low- to medium-skill projects like drywalling and painting. More difficult with high-skill projects like electrical work.
- Bartering - No, you won't find any contractor who will trade you the entire cost of your addition--that is, labor and materials. But s/he may be willing to reduce or eliminate the commission if you have something valuable to him/her: legal or medical expertise; a boat or car; property; timeshare; etc.
Comments
When my wife and I bought our place in PA, we knew we were going to do some renovations, so we tied it into our loan with our mortgage bank Intercontinental Capital Group. It was so much simpler than getting separate financing and we were able to capitalize on our already low rate.
This is a good point. You can probably minimize loan costs by doing it this way. And as you mention, at this point in time mortgage rates are very low, so you can pounce on them for your remodeling.