Remodel your home and reframe your future
Home improvement can be an intimidating — albeit rewarding — process. With proper planning, you can better avoid potential complications and build out your future home successfully.
Home equity loan vs. line of credit
Home equity loans (HEL) and lines of credit (HELOC) are common ways to finance home renovations. Learn the differences between the two and choose the option that's right for you.
- Home equity loans (HEL): Borrow money by leveraging the equity in your home to receive one lump sum. HELs typically have relatively low fixed-interest rates and are best used to cover the cost of a large purchase (e.g., a new roof). Required payments are to principal and interest.
- Home equity lines of credit (HELOC): Borrow money by leveraging the equity in your home. With a HELOC, instead of receiving one lump sum, you borrow against an approved limit as you need it. Monthly payments are based on the amount borrowed and current interest rates. Be mindful of overspending and the potential risk of variable interest rates.
Although both may be used for purposes other than home improvement (e.g., unexpected medical bills), please talk to your accountant about the eligibility for tax deductions. Often, the interest paid on a HELOC is only tax deductible when used to buy, build or substantially improve your home.
Additional insights into home equity
You purchased a house; now make it a home
Whether you're adding a nursery or just installing those granite countertops you've always wanted, speak with a loan officer to discuss your remodeling project.
The right way to remodel
Before grabbing your tool belt, consider this list of action items that should help put you on the road to renovations.
- Scope the project. You'll want to clearly define what you're looking to accomplish during this round of remodeling. You don't want to budget for a patio and wind up with a swimming pool on a whim.
- Get the right loan. Be sure to get the loan that works for you and your project. There are various options out there — each with pros and cons — so spend some time shopping around beforehand.
- Plan ahead. From required permits to seasonal factors, there is no shortage of things to consider as you're thinking about home improvement. Do your homework and/or consult a trusted advisor.
- Shop around for contractors. Get recommendations and references, and follow-up with phone calls or meetings where necessary to ensure you're hiring someone you can trust.
- Compare bids. Get bids from multiple contractors and compare the cost breakdowns (e.g., materials, labor, expenses, etc.).
- Put it in writing. Draft a contract that details all aspects of a project, including payment schedules, proof of insurance, relevant dates, lien releases, etc.
Additional financing options
Home equity lines and loans
Your house is your cash reserve; tap its equity for the things you want to do. You can draw on a line of credit as you need it; with a loan you make all the funds available to yourself at once.
For a brand-new home or major renovations, you can get a construction-to-permanent loan for both the building costs and the mortgage.
Government and State Agency loans
Government programs are in place with low down payments and interest rates to get you the front door keys.
All lines and loans are subject to credit approval.