10 TIPS ON DECIDING HOW TO PAY FOR YOUR SAN DIEGO HOME REMODELING PROJECTS

One of the many important decisions you will make when you decide to remodel your home is how you will pay for the project. For some people, this is a simple decision – either they pay cash or they visit their local bank and talk with a loan officer about a second mortgage or a home equity loan. While these direct approaches to paying for a remodel may seem to make the decision easier, they might not be the best options for you.

There are a number of ways to pay for your San Diego home remodeling project. You might decide on a single option or a combination of options – perhaps paying part of the cost in cash and borrowing the rest. Here are our top ten tips on deciding how to pay for your San Diego home remodeling project.

Approach your local bank for a home improvement loan. This is a simple and straightforward approach. If you know the loan officers at your local bank, this might be your answer. In some cases, however, this will just be one of many options to explore and consider. Your bank might be able to help you with a home improvement loan, a second mortgage, a home equity loan, a home equity line of credit, or a refinance of your mortgage.
Place remodeling costs on your credit card. This might be a great option if you are doing a small remodel or if you will be doing most or all of the work yourself. If you use a credit card, you can save by using a card that pays you back a percentage of your purchases. You can also talk with your credit card company and ask about special interest rates for large purchases.
Consider a FHA Title 1 loan. These loans, insured by the federal government can be used to finance property improvements to improve the usefulness or livability of the home. If, for example, you need to deal with a mold problem you might qualify for this type of loan. If you are remodeling to make a home accessible for someone with a disability, you might qualify for this type of loan.
Spend some time discussing options with a mortgage broker. Mortgage brokers can offer you more than 200 different loan programs, including home equity, construction loans, home improvement loans, or home equity line of credit. They can quickly tell you what types of loans you are eligible to consider.
If you are 65 or over consider a reverse mortgage. If your home is paid off and you need to make some improvements that will cost less than the market value of your house, you can take a reverse mortgage that will not have to be repaid until you or your children sell the home.
You might choose to pay cash from your savings. This is a very popular way to pay for remodeling projects. Be sure to compare the interest rate you are earning on your savings with the cost of other financing options. If you can take out a loan at an interest rate below the rate of the interest you are earning on your money in a savings account, you might want to reconsider and take out a loan.
You can borrow from your retirement account or 401k. Although many people choose this option for financing a San Diego remodeling project, keep in mind that this can be dangerous. Many people borrow from these accounts and never quite get around to paying it back. This can make the cost of living very tight in your old age. If, however, you can be disciplined about repaying the loan, this might be a good option for you.
You can refinance your home and get cash out to pay for your remodel. This is another popular option. Particularly in times when interest rates are lower than your current mortgage interest rate, refinancing can save you a bundle over the life of the loan. The refinance also allows you to add to the amount of the loan and receive cash to pay for your remodeling project.
You should think long and hard about taking a loan from your contractor. These loans usually carry higher interest rates than loans available elsewhere. Another downside of borrowing from your San Diego remodeling contractor is that you then become locked into working with a specific San Diego remodeling contractor. Although this is certainly an option to consider, it is not recommended.
Consider special federally-insured loans. If the value of your home as it currently exists is insufficient to support the financing needed to renovate the home, you might qualify for a renovation loan. If the purpose of your San Diego home remodeling project is to improve the energy efficiency of your home, you might qualify for an energy efficient upgrade loan.
The most important thing in deciding how to pay for your remodel is to consider all of your options. If you are not sure which options fit your San Diego home remodeling project, discuss it with a mortgage broker before you make a decision. By considering all the options you can choose the best way for you to pay for your remodel.

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