Taking on a home renovation

Even if you’ve been through a project like this before, these action items are important to keep in mind before grabbing that tool belt... or your wallet!

• Scope the project. Define what you're looking to accomplish. Some projects will be more complicated than others but each project deserves attention to every detail.
• Your budget. Sticker shock can really dash your dreams. Figure out how much you can comfortably spend and where that money will come from. The money may come from more than one source, so count them all. 
• Plan ahead. Try to do a lot of your own research before connecting with a banker, contractor or architect. You’ll be better prepared for conversations that could otherwise be overwhelming with details.
• Shop around for experts. Get recommendations and references from those you trust. Have as many meetings and gather as many bids/estimates as you need before you commit to a partnership. The same goes for your bank – see what different lending options are available to you. 
• Get it in writing. Insist on a contract that details all aspects of a project, including payment schedules, permits, proof of insurance, relevant dates, lien releases, etc.

If you decide to go the HEL or HELOC route, check your credit score first. Because of Covid-19, instead of a free report once a year, you can now get a free report once a week at AnnualCreditReport.com. Once you’ve reviewed your report, talk with your bank about which loan option is best 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 financial professional about the eligibility for tax deductions.

Please note: You cannot get a loan or equity line if you are vacating the property during the renovation process or if you are using the funds to change the footprint of the house.