Q&A: How Should I Fund a Home Improvement Project?

Q: I’m planning to renovate my home and wondering about my financing options. What’s the best way to pay for a home improvement project?

A: Home renovations can breathe new life into your living space, enhance your property’s value, and customize your home to your unique needs. Whether you’re upgrading the kitchen, adding a new room, or tackling long-overdue repairs, funding the project can be the most significant consideration. Fortunately, there are financially responsible ways to pay for a home renovation.

Here’s a complete guide to help you choose the best option.

1. Determine the scope and budget of your renovation

Before exploring financing options, take a moment to outline your renovation goals and calculate the total costs. Are you doing a minor upgrade or a major remodel? Gather estimates from contractors and research material prices to establish a realistic budget. Once you know your renovation’s scope and cost, you can determine how much financing you’ll need.

2. Use savings for smaller projects

For smaller renovations or updates, tapping into your savings can be the simplest option. Paying with cash allows you to avoid debt and interest charges. If you’re considering this route, evaluate your emergency fund and ensure you’ll have enough left for unexpected expenses after covering the renovation costs. The best part of using savings is that you’ll be done making payments on the project when the work is complete instead of paying it off for months or years to come.

3. Home equity loans (HELs): ideal for large-scale renovations

Home equity loans are one of the most popular ways to finance major renovations. These loans allow you to borrow against the equity you’ve built in your home, which is essentially the difference between your home’s market value and the remaining balance on your mortgage.

The benefits of choosing a home equity loan to fund your home renovation include locking in a fixed interest rate and having predictable monthly payments throughout the loan, as well as lower interest rates than credit cards or unsecured loans. The funds are also disbursed in one lump sum, which makes them ideal for homeowners who are looking for capital to cover a single home improvement project.

If a home equity loan sounds like it might be for you, we can help! Call us at 405-230-1328 or check out to learn about your options today.

4. Home Equity Lines of Credit (HELOC): flexible and accessible

Another great option for funding a home renovation is a Home Equity Line Of Credit (HELOC). This loan works like a credit card, allowing you to borrow funds as needed during a draw period that generally lasts five to 10 years. This flexibility makes HELOCs ideal for ongoing or phased renovations.

The advantage of using a HELOC for your home improvement is that you’ll only borrow what you need when you need it. You’ll enjoy lower rates compared to unsecured loans and credit cards. Plus, you’ll only make payments on the interest during the draw period.

If you’d like to open a HELOC to pay for your home renovation, we can help! Focus Federal Credit Union offers HELOCs with competitive rates. Call, click, or stop by today to learn more.

5. Unsecured loans: a versatile option

If you don’t have enough equity in your home for a HEL or HELOC, or you’d prefer not to tap into your home’s equity, an unsecured loan may be your solution. These loans don’t require any collateral, which means you don’t need to have accumulated equity in your home or to pay for an appraisal. The loan will have fixed interest rates and terms to go with a faster approval process when compared to equity-based loans. As loans with no collateral, they tend to have higher interest rates than loans that are backed by equity, but at Focus Federal Credit Union, we offer unsecured loans with favorable rates. Speak to a Financial Services Representative today to find out more.

6. FHA 203(k) loans: renovate while purchasing

If you’re buying a fixer-upper, an FHA 203(k) loan combines your mortgage and renovation costs into one loan. This option allows you to finance renovations as part of your home purchase. You’ll have only one loan to manage, which makes it easier to keep track of the payments.

Choosing the best means for financing your home renovation can seem daunting, but the options available through Focus Federal Credit Union make it simple. Use this guide to learn about the various ways you can fund a home improvement project and reach out to us at 405-230-1328 to learn more.