If you have an unfinished basement area you have probably thought about finding a practical use for that wasted space. It is also likely that you have seen articles and pictures to give you inspiration. You might even have some great ideas of your own on how to turn your basement into a highly useful and decorative area. You have just one problem – you have to pay for your basement renovation dream.
We have previously looked at how much it is likely to cost you for your basement remodel. Once you have a rough guide to how much money you need then you can then look at your financing options.
Here are some tips for financing that basement remodel.
1, Use Your Savings or a Windfall
You might be lucky enough to have built up a nest egg of savings which you have sitting aside for home renovation. If that’s the case, you are lucky, and we look forward to hearing from you.
Most people will probably not the full amount sitting aside. They may have enough, though, to use as a deposit in combination with some other means of financing that basement remodel.
You may, of course, have received a windfall of some form. Perhaps you have sold property and made a profit on the deal. Or perhaps you have received an inheritance or a good tax refund. You could use that for your basement renovation once the money has cleared.
A basement renovation is a sound use of your savings or a windfall, as it is likely to increase the value of your home, giving you a better return than simply leaving the money in the bank.
2. Obtain Additional Home Finance Using the Equity in Your Home (a Home Equity Line of Credit)
This can be one of the cheaper ways of borrowing finance for your basement renovation, assuming you have paid sufficiently on your mortgage and have positive equity in your home. Banks and other financial institutions are likely to fund home improvements which they can see will improve your home’s capital value.
Obviously, this depends on factors like your credit history and ability to repay your increased mortgage repayments.
The interest rate you are charged will probably be the same as your existing home rate, making it considerably cheaper than using credit card debt or taking out a personal loan.
3. Title 1 Loan
A Title 1 Loan is a special type of loan offered by the U.S. Department of Housing and Urban Development that insures lenders who provide home improvement loans. Because this takes away much of the risk for the lenders, they can offer these loans at more affordable rates than they otherwise would. They are often suitable for people who don’t have enough equity to be able to take out additional home finance for their basement renovation.
4. Credit Card Financing
If you have a credit card with a high enough limit you could consider using it for your basement financing. However, this would usually be a very expensive way of financing that basement remodel. It could be useful if you only need short term bridging finance, as you could use it for a month’s financing and pay no interest at all if you repay it fully within that month. However, it would be one of the most expensive payment methods if you need to make monthly or weekly repayments over an extended timeframe.
You need to carry out your own research to see which of these options is best for your personal situation. If you spend a short time investigating these different ways of financing your project given your circumstances, you could potentially save yourself thousands and end up with the basement renovation of your dreams.