Making updates to your home can make your space feel more personalized and increase the value of your home over the long-term. As beneficial as home improvement projects are, costs tend to rise quickly; therefore, it is important to take an informed decision promptly about home improvements. If you do not have the cash on hand to complete your project, here are some proven ways to finance home improvements:
LightStream – A division of Suntrust Bank
From 5K to 100K
No Home equity required.
You should have 45 % debt/income ratio or below.
No minimum income requirements.
Recommended to have 660 credit score or above.
Not for business, but for individuals.
Ygrene
This program, with built-in consumer protections, delivers greater choice for home and business owners by providing accessible and affordable financing for energy efficiency, resiliency, renewable energy, water conservation, storm protection and seismic upgrades.
Eligibility for Ygrene is based primarily on home equity. No minimum credit score is required. Payments can be spread out up to 30 years with no payments for up to a year or more, subject to underwriting guidelines, approvals and date of funding.
Ygrene can be used to pay for hundreds of energy-efficiency and renewable-energy upgrades for both home improvement and commercial projects. In certain states, storm protection improvements, electric-vehicle charging
stations, water-conservation projects, and seismic retrofits are also eligible. You can find out which projects are available in your area here.
Some common improvements that Ygrene can be used for including solar, energy-efficient heating and cooling (HVAC) systems, windows, doors, roofing, insulation, ducts, pool pumps, water heaters, drought-tolerant landscaping, and water-conserving indoor plumbing repairs. Here is the full list of projects that Ygrene can finance by state.
Use home equity to finance home improvement projects.
There are several ways to take advantage of your home equity to make improvements to your abode.
Home equity line of credit
A home equity line of credit (often referred to as a HELOC) may be the flexible financing choice many homeowners need. With this option, the borrower has access to a set amount of home equity but can use it whenever they want, in increments or all at once up to the amount they have been approved.
The borrower draws from the line of credit as needed, then pays interest only on the amount used. A flexible line of credit can be helpful for budgeting for the renovation and for having a back-up plan in the event of a change order or another unexpected situation that arises and increases the cost of the renovation. Having the line of credit available can also be helpful for completing long-term projects in stages.
HELOC interest rates are typically variable, which means they can increase or decrease depending on market conditions. If you are looking for a fixed rate, a home equity loan could be a better option.
Home equity loan
Home equity loans are like HELOCs in that they are both based on the amount of equity built up over time. With this option, rather than having access to a revolving line of credit, the equity (all or some of it—it is up to the borrower) is converted into a fixed-rate loan.
One benefit of taking out a home equity loan rather than a HELOC is interest rate stability. The loans typically have a fixed interest rate, so the borrower knows how much each payment will be well in advance.
Cash-out refinance Cash-out refinances are like home equity loans in that the amount you receive is based on available home equity and that they are given to the borrower in a lump sum. The one significant difference is that a cash-out refinance replaces your mortgage while a home equity loan is a separate account altogether. When choosing between a cash-out refinance and a home equity loan, interest rates alone may not be the best way to determine the appropriate option. Also, factor in other considerations like loan balance, loan term and long-term plans when making your decision.
Use a loan to pay for home renovations.
While utilizing acquired home equity can be advantageous in some circumstances, there are other instances where taking a different route might be a better idea.
If you do not have much equity built up in the first place, you may be better off letting it accumulate longer and seeking out another strategy for paying for your home renovations. This way, you will not deplete this resource just as it is starting to grow.
Interest rate is one of the most impactful aspects of any loan. If you have a low mortgage interest rate, getting a cash-out refinance could replace it with a heftier one that could cost you more in the long run, raise your payments, or add to the length of your loan. Maintaining your current mortgage and finding another financing method could be the best option in this situation.
Two common options for financing home improvement loans without tapping into home equity are personal loans and credit cards.
Personal loan
In years past, many homeowners could deduct interest payments made on home equity loans and lines of credit when filing their taxes, making these valuable investments. However, the new tax law passed in late 2017 set limits to this benefit, making them less appealing to some borrowers. As a result, some may be more inclined to consider a personal loan.
These have a few significant advantages over products that use home equity. With a personal loan, the borrower’s home is not used as collateral, which means the home is not put directly at risk if the homeowner defaults on their loan. Additionally, there may be fewer closing costs associated with a personal loan. The downside is that personal loans are often unsecured loans or may need some other kind of collateral to secure the loan. Without collateral, qualifying for a personal loan may be more difficult and the total amount of the loan will be limited.