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Do You Know How To Finance A Remodel Without Equity?

Posted by Luke Hancock

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Nov 12, 2015 9:40:43 AM

finance-remodel-equity-newIf you have to stare at those shabby varnished kitchen cabinets and speckled pink countertops much longer, you’re going to scream.

A kitchen remodel — starting with a really big sledge hammer — is the only way to save your sanity.

Real-estate experts are with you on this one. Wisely chosen home upgrades can pay off in the long run with increased home value. But you have to come up with the money to get things rolling.

Time for a home equity loan, right? Well, maybe. If you have enough equity in your home.

But since 2008, when the sub prime mortgage bust hit, many homeowners have seen their home equity disappear.

If that’s the case, you’ll have to look for other funding sources. The good news is, there are options that don’t require collateral. Pink speckled counters, buh-bye.

Here are six suggestions for how to finance a remodel without equity.

Personal Savings

It may mean you have to put up with those ghastly kitchen cupboards a while longer, but experts say cash is the best way to pay for a remodel.

Save up, the old-fashioned way. Or maybe you have money from a workplace bonus or an inheritance.

Bonus: No interest.

Credit Cards

Using a credit card for a remodel gives you the right to dispute certain charges if services aren't delivered as agreedThis is an option, but use it with caution. If you don’t pay off the balance each month, you could face high interest charges and end up paying a lot more than you planned.

One option: Take advantage of zero interest promotional credit cards that offer six, 12 or 18 months with no interest.

Some cards allow you to transfer a balance with no interest. But read the fine print: If the balance on a card with a low introductory rate isn't paid in full by the time that period expires, the interest rate typically zooms way up.

If you can secure a deal with little or no interest, you can pay off your remodeling costs over time without paying much extra. Just don’t go crazy. Do you REALLY need that Italian Murano glass chandelier?

Bonus: Using a credit card gives you the right to dispute certain charges if goods or services aren't delivered as agreed.

Unsecured Consumer Loan

If your remodeling project is on the small side — less than $10,000 —  consider an unsecured consumer loan. Unsecured means your home isn’t considered collateral. The loan is secured based on your credit worthiness.

Note: The interest rate will probably be higher, and interest on these loans isn’t tax deductible.

FHA Title 1 Home Improvement Loan

The Federal Housing Administration, or FHA, offers home improvement loans to homeowners even if they have poor credit and no home equity. The FHA Title 1 Home Improvement Loan offers funds up to $25,000 with fixed interest rates.

One thing to note: The FHA requires a licensed contractor to perform all work. You’ll have to put down the sledge hammer and watch somebody else demolish those pink countertops.

Contractor Loan

a FHA Title 1 Home Improvement Loan requires licensed contractors to perform all the workLarge contractors sometimes offer in-house financing. Be aware interest rates may be higher than with other loan options. Be sure to read the fine print and know exactly what the terms are.

Income Tax Credits

This isn’t a loan, but it is money. States often offer state income tax credits and rebates that can help you finance a project. You might be eligible for rebates or credits for purchasing energy efficient appliances or for making energy efficient improvements such as insulation, windows, doors and roofs.

Follow the requirements, and you can get refunds after completing the projects.

Don’t Forget The Dumpster

While securing the money for your remodeling can be tricky, disposing of all the debris is easy. Just order a Bin There Dump That dumpster rental.

As the crumbled drywall, worn-out carpeting and tacky varnished cupboard doors pile up, just walk them right into the bin through the convenient rear doors, instead of hoisting that dusty debris up over the sides. It’s one of the many features of our residential-friendly bins.

Say hello to our bright green bins — and goodbye to those pink-speckled counters. When the time comes, find a dumpster operator near you.

Find out EVERYTHING you need to know about renting a dumpster bin.
Images: Kitchen plan, Credit cards sign, Contractors

Topics: Home Renovation