61% of Homeowners Set to Borrow Money in 2025 for Home Renovations

Third quarter of last year, 472 billion was spent on home renovations and expected to increase in 2025, according to the JCHS (Join Center for Housing Studies). Kitchens and bathroom are still the most common target areas for homeowners, but improving floors and painting are in the top 5 list of projects for 2025.

30% of the surveyed homeowners are planning to use credit cards for funding, but we would like to also offer you some options that might work better below:

When considering financing options for home renovations, homeowners have several avenues to explore, each with its own advantages and considerations:​

1. Home Equity Line of Credit (HELOC): A HELOC allows you to borrow against the equity in your home, providing a revolving credit line for ongoing renovation expenses. Interest rates are typically variable, and your home serves as collateral. This option is suitable for projects with uncertain costs or extended timelines. ​

2. Home Equity Loan: Also known as a second mortgage, this loan provides a lump sum at a fixed interest rate, using your home's equity as collateral. It's ideal for homeowners with substantial equity undertaking large, one-time renovation projects. ​wellsfargo.com+3The Mortgage Reports+3RenoFi+3

3. Cash-Out Refinance: This involves refinancing your existing mortgage for more than you owe and taking the difference in cash to fund renovations. It can be advantageous if current mortgage rates are lower than your existing rate, allowing you to finance improvements while potentially reducing your interest rate. ​The Mortgage Reports

4. Personal Loans: Unsecured personal loans don't require home equity and can be obtained quickly, making them suitable for homeowners without significant equity or those seeking faster funding. However, they often come with higher interest rates compared to secured loans. ​wellsfargo.com

5. Credit Cards: For smaller projects, using a credit card with a low or 0% introductory APR can be convenient. This strategy is best if you can repay the balance within the promotional period to avoid high-interest charges. ​NerdWallet: Finance smarter

6. FHA 203(k) Rehab Loan: Designed for homebuyers purchasing fixer-uppers, this loan combines the mortgage and renovation costs into a single loan, simplifying financing for extensive renovations. ​The Mortgage Reports

Considerations:

• Interest Rates: Secured loans like HELOCs and home equity loans typically offer lower rates due to the collateral involved.

• Loan Terms: Understand repayment terms, including any potential balloon payments or rate adjustments.​

• Fees and Closing Costs: Be aware of any associated fees, which can add to the overall cost of the loan.​

• Tax Implications: Interest on loans used for substantial home improvements may be tax-deductible; consult a tax advisor for specifics.​

It's essential to assess your financial situation, the scope of your renovation project, and consult with financial advisors to determine the most suitable financing option for your needs.

If you're looking for a reliable and fair quote for your project, contact us at 203-794-0304 or visit us at ourhousellc.com. We have the most five star reviews out there and offer a free consultation to help guide you in remodeling your home.