Putting plans into practice: how to fund your home renovation dreams  

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From making necessary fixes and repairs to remodeling a room or building an extension, home renovations, if carried out properly, can boost the value of your property, so you can ask for a higher price when you put it on the market and make a profit. But in order to earn money, you’ll have to spend money first and, unfortunately, renovation projects don’t come cheap.

It’s easy to think of ways to improve your home’s comfort, appearance, and functionality, but finding the money to put all these ideas into practice is not nearly as simple. So, unless you have a healthy bank account – or had the strike of inspiration to invest in crypto when the Bitcoin price boomed and became rich overnight – you’ll have to start looking for solutions to finance your home reno.  

How much you’re going to require to cover all the expenses largely depends on what plans you have in mind. But if you’ve done the math and come to the conclusion that you don’t have the necessary capital, the only way to move forward is to explore different financing options. So, here are a few ways you could solve your budgeting issues and put your renovations into motion.  

Tap into your savings

If you’ve been saving money for rainy days, now could be a good moment to put the money you’ve set aside to good use. You might be reluctant to tap into your savings account to pay for renovations since you’ve probably made certain sacrifices to build your reserve. However, it’s much more convenient and less time-consuming to cover the costs yourself than using money from other sources. 

Besides, the purpose of a savings account is to grow your money and provide a safety net in case of unanticipated financial challenges or help you reach certain goals and plan for larger expenses, and home renovations fit right into this category. The only caveat here is to make sure you have enough money in your savings account before you break ground. Remember, most renovations go over the initial budget, so factor in unexpected costs to ensure you don’t run out of money halfway through your project.      

Ask family or friends for financial support

Another way to gather the funds you need without involving financial institutions in the process is to talk to your family or friends and ask them if they’re able and would be willing to chip in. But keep in mind that just because you’re borrowing from people you know and want to help you out doesn’t mean you get to be more casual about repayments and give the money back whenever it’s convenient to you. This kind of attitude can lead to all sorts of issues and affect your personal relationships. 

You should treat family/friend loans like any other type of loan. It’s recommended to have a signed written agreement from the get-go to prevent misunderstandings. You should also create a repayment schedule and stick to it, and consider paying a minimum interest rate, especially if you intend to borrow a larger amount and spread repayments over a longer period.   

Leverage your home’s equity 

If none of the above options suit your situation, you may be able to find a solution by looking into home equity loans. Equity refers to the difference between the amount you still have to pay on your mortgage and what your home is currently worth. 

A home’s equity usually increases over time as owners move forward with their mortgage payments and the property’s value goes up. This means you may have quite a bit of equity built in your home if you’ve owned it for a long period of time, and you’ve been diligent with your loan payments or made a big down payment. If that’s the case, you can take advantage of your home’s equity to cover renovation costs. But don’t forget that you’ll still have to pay this money back on top of your mortgage, so you have to figure out how that might influence your finances in the long run. 

Refinance your home loan 

Home equity is not an option for all homeowners, so if you don’t qualify for equity release, you can take on a different approach and refinance your current home loan. Basically, this implies swapping your current loan for a new one that is more advantageous. You’ll have to contact a new lender who is willing to pay the balance you owe on your initial loan and then draft an agreement for a new loan, adding the extra amount of money you require for renovations to the total sum you have to pay on your property. 

While this will help you acquire the funds you need, it’s also going to increase your mortgage payments and even extend the repayment schedule. It’s up to you to decide if that’s something you can work with and won’t create a financial burden that’s too heavy for you to carry.   

Take on a renovation loan

Some people are reluctant to get into home equity or refinancing because it might complicate their mortgage situation, so they prefer a more straightforward route by taking on a renovation loan, and you can do the same. 

These financial products resemble personal loans, but were specifically designed for those who want to update different features of their house but lack the funds, so they might suit your needs better than other types of loans. Make sure to do your research before committing to a renovation loan as terms and conditions can differ from one provider to another.  

Bottom line 

Despite the perks it provides, renovating your home can be a financially challenging endeavor, and you might find it difficult to start a project if you don’t have a solid financial situation. But even if your plans don’t match your budget, you can still find a viable solution to fund home improvements as long as you remain realistic about your possibilities and don’t make hasty decisions.