Money for Your Renovation

Many things about home renovation are flexible. You can always change wall colors or nudge a wall another six inches. But one thing is certain: you need money. Not a single nail gets hammered into place without money.

Cash and Liquid Assets

The most readily available money you can have: savings, checking, CD's and savings bonds near maturity.

• No interest, no fees, no charges.
• You are not dependent on anyone else.

• Depletes any reserves you may have.
• Most people don't have a lot of cash available.

Bottom Line: Cash and liquid assets are the best way to fund your projects--but only if you've got plenty to spare.

Credit Card

A credit card that you pay off at the end of each month. Or a zero-interest that you don't have to pay off for six months or a year. Some homeowners pay off one zero-interest card with yet another zero-interest card, thereby creating a permanent, but risky, no-interest loan.

• Money available quickly.
• Lucrative points or rewards possible on some cards by charging large home-related purchases.

• Danger of high interest and fees.
• Give you false sense of security that you have more money than you actually have.

Bottom Line: A tricky way to finance home renovations, and one that requires attention and maintenance.

Home Equity Loan

A home equity loan is the classic way to finance home renovations. Take out a loan against the equity in your own house.

• Large amounts of money may be available for large projects like additions.
• Lower interest rates than personal loans and credit cards.

• If you keep depleting your equity, you reduce the sum you will receive when you eventually sell the house.
• The large amounts available with this loan encourage spending on things unrelated to the renovation.

Bottom Line: Target this loan only for specific projects.

Sweat Equity

Got any willing friends and family? For the price of a six-pack and a takeout pizza, they may help you put some sweat equity into your renovation project.

• Labor is completely free.
• Satisfying to have 100% control of your project.

• Only the labor is free; you still have to pay for materials.
• If a learning curve is involved, still may be cheaper and faster to hire workers.

Bottom Line: Some sweat equity is inevitable, and even can be fun, but don't stretch it if you're not sure of your abilities.