A great time in the life of a home owner is when all the bills are paid and all the new improvements are done and paid for. No more mortgage to pay each month and the home is up to date with all the latest gadgets and trimmings. But actually, this is a rare scenario of fantasy land for the everyday homeowner, so we have to be a little more savvy with our budget when it comes to home renovations.
Celebrate the Accomplishment of Home ownership with Good Decisions
Home ownership is a great time in life, having done a great deal of research, searching, dealing for the right home price, signing for a mortgage, and all the activities involved in relocating. But even if you buy a brand new home, time flies and starts to take its toll on the once shiny, new paint job. Appliances can fail, shingles get loose, leaks and cracks can appear. Your home can become a victim of time just like our own bodies. Money will be needed to fund home improvements to shore up any decay and keep the home from falling into disrepair, or just to prevent it becoming outdated in interior design. For those who hold the aesthetics of the home dear, planning a project to renovate the home is in order.
Being realistic is a good starting point.
Questions should be asked, can work be done in the best way, with cash upfront to avoid having to take on debt with interest on top of periodic payments to fund the project? Cash is the very best and most economical way to complete a home improvement project. For those who have cash on hand to do this or have a windfall of cash coming in, this is a wonderful thing. There are those who have been good at saving and when the time comes the cash can be drawn on. A kitchen can be remodeled or an addition like a conservatory can be added on and this can all be done within your budget. An emergency situtation like fencing needing to be redone or repaired to add to the security of a property to keep your lovely home safe.
Project Scope and Budget for Home Improvements
Remember to plan properly if the home improvements, such as a paint job, are to be financed. Cash is king, but not many of us have the cash on hand for home improvements, especially in emergency situations. Borrowing money wisely is a skill. For many, the Home equity line of credit, or a second mortgage, secured by equity in the home, is a good way to keep the interest rate low at around 4 to 5 percent. Seek a shorter term than 30 years as this will keep the cost of the renovations down, paying less interest over time. A 25 or 15 year term would be better with no early pay off penalties.
You also need to make sure you research your home improvements carefully so that you don’t end up overspending or spending unwisely. If you are looking to change your windows, for instance, then it is worth checking out a reputable company who can offer not just a quote, but also help and advice.
Construction Loans are Another Option for Very Short Term Projects
Many home improvements are funded by the builder in an interim loan that pays for the immediate construction costs. The bank will inspect your project at each phase of the project and fund each step to pay the contractor or the contractor will offer this financing and the you will pay the contractor with a final second mortgage secured by the equity in the home.
We all know about Murphy’s Law. Whatever financing method is chosen, always consider the contingencies of overages, unplanned events that obstruct the completion of the project, and higher costs for resources and materials. Always plan for at least 25% over the original budget as many times the unexpected costs do materialize.