Homes take work: furnaces stop working, windows get drafty, paint peels and appliances age. But maintenance costs money. Your home is probably the biggest investment you’ll ever make, so investing in its upkeep and improvement is usually a smart strategy. Can making improvements on your home be affordable?
Absolutely! You just need to determine the financing strategy that makes the most sense for your situation. Options include:
- Credit Union or bank financing through your home improvement dealer
- Mortgage refinance
- Home Equity Line of Credit (HELOC)
- Home Equity Fixed Rate Loan
- Credit Card
Here are some things to consider about each payment method:
Cash. If you have it, this is a good way to go because you don’t pay interest on borrowed money. However, if you have to reduce your savings significantly, or if you’re dipping into your “emergency fund” for a non-emergency, you may want to reconsider. When interest rates on borrowed money are low, you’re better off saving your cash for real emergencies and borrowing money at a low rate. You don’t want to find yourself having to pay for an emergency with a high-interest credit card.
Financing from a financial institution, via your home improvement dealer. This is a good solution because those who qualify can get great rates and quick service, depending on the lender. Washington Energy Services often arranges financing through credit unions such as Salal Credit Union, so customers get great rates, terrific service and quick responses to applications. Plus, customers become members of the credit union and can take advantage of all their products and services.
Mortgage refinance. When rates on mortgage loans are low, it can be a perfect time to refinance. You can save hundreds, even thousands, in interest over the life of a loan, plus you can lower your monthly payment or shorten the term of your loan! The extra cash in your pocket is a great way to finance that new, energy-efficient siding or an environmentally friendly tankless water heater.
HELOC. A home equity line of credit allows you to borrow against the equity you already have in your home, and the loan may even be tax deductible, though you’ll need to consult your tax advisor on deductibility. With a HELOC, you can borrow up to a high percentage of your home’s equity, but you only pay interest on the money you borrow. This is a great alternative if you’re not yet sure how much money you’ll need for the projects you’ve planned.
Credit Card. Of all your options, your credit card is probably the most expensive, due to usually higher interest rates. If you can pay off the balance on your card within your grace period, you’ll escape the finance charges and possibly earn some rewards, depending on the card you use. However, if it will take several months or more to pay off the costs of your project, some of the other options will likely cost less in the long run.
Courtesy of Salal Credit Union, SalalCU.org