Making improvement to your home is a smart move. Not only do you get to enjoy the upgrades, but it increases the value of your home should you choose to sell at some point. And while additions such as kitchen remodels, decks, and swimming pools can add up, there are several financing solutions to help you out.
1. Home Equity Loan
Home equity loans are the most popular way homeowners finance additions. These types of loans generally have a lower interest rate, because you are borrowing against the value of your home. Home equity loans are easier to get because it is a secured loan against the equity you have built into your home. They also allow you to get your funds in one lump sum. This enables you to pay your contractor and purchase any additional materials needed for your addition. Believe it or not, you can also take advantage of tax deductions allowed with home equity loans.
2. Personal Loans
Some homeowners choose to secure personal loans. This option can be excellent for those with good credit and a steady income. However, these loans aren’t secured from your home equity and could present higher interest rates. There are also no tax deductions with personal loans. If you haven’t yet, built home equity, this might be an option worth considering.
3. Energy Improvement Loan
Is your new addition increasing your homes energy efficiency? If so, the federal government may help you out. The requirements include specific energy-efficient standards that must be proved during an inspection. Some states also allow for income tax credits and rebates that can assist with paying off your home addition. Items such as, energy efficient: appliances, windows, doors, roofs and insulation all fall under this umbrella.
Financing your new home addition doesn’t have to be stressful. There are many options to help you improve your home as well as reduce your utility bills. And don’t forget, any improvement you make to your home will help increase its value in the long run. Win, win!
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