Remodeling, Financing and Taxes

Is your home in serious need of renovation? Whether it needs a remodel because it’s looking old and out of date, or for more serious reasons, such as a failing roof, where do you get the money to pay for things like that? Unless you just have thousands of dollars at your disposal, the answer is likely through financing. However, there’s a smart way and a not-so-smart way to secure financing.  

Obviously, as a responsible homeowner, you want to choose the smart way.

Good Credit Options

The best case scenario is that you have excellent credit and can work with an upscale, reputable lender, such as a bank, a broker, or a credit union. If you are able to secure a loan from one of these choosy institutions, you can use your home as collateral and borrow the amount you need.

Just don’t go too crazy with borrowing, or you could blemish the spotless credit you’ve worked so hard for. Only borrow what you actually need and don’t get sucked into doing extra repairs or remodeling just because you have the credit available.

Tap Into Your Savings

If you have a lot of equity built up in your home, then you can borrow against that to handle remodels and repairs. If you don’t, however, then you may have to look to other options.

One of the best options is to tap into your savings account. That might be tough, but paying with cash is always better and cheaper than paying with credit in the long run. You should only do this, however, if you have enough to still maintain some degree of savings. Most financial advisors suggest always keeping at least three months worth of living expenses in your savings account. If you can do that and still manage your remodel or renovation, then go for it.

Tapping into your savings is serious business, though, so save this option for repairs and renovations that are absolutely necessary, not just ones that are going to make your home look prettier.

Break Out the Plastic

When you’ve exhausted all other options, it may just be time to use your credit card to finance those remodels or repairs. As a caveat though, don’t use your plastic if you’re not able to avoid paying interest on this hefty purchase. If you can pay off more than your minimum amount each month, even after the repairs are done, then go for it. If you can’t, though, you may want to keep searching for the right fit for you.

And, speaking of the “right fit,” every person and every person’s situation is different. If your home really is in need of some TLC and you’re not sure how to foot the bill, go over your options with a financial advisor, determine of your financing of the project can result in tax breaks. These professionals can always help you to find the right solution for your situation.