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According to the Joint Center for Housing Studies of Harvard University, home improvements and repairs will cost consumers over $340 billion annually by the start of 2019.
While that money is likely used for a variety of home improvement purposes, bathroom renovations make up one of the most common home improvement projects. Luckily, there are plenty of bathroom remodel financing options for consumers.
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Cost of Remodeling Your Bathroom
Today, most homeowners can expect to pay somewhere between $6,000 and $15,000 to remodel their bathroom, but the total price depends on a variety of factors, with some efforts costing close to $25,000 or more.
Small projects, like a simple update of paint, hardware, or even flooring, may be below that $8,000 mark; however, more in-depth projects, like installing a shower or replacing a tub, will likely be costlier.
There are ways to save, of course. Homeowners can choose to do some of the work themselves, but for many, particularly when major renovations require an expert (e.g., plumber, general contractor, etc.), the expenses can quickly add up. Once tools, labor, materials, fixtures, and any potential fees are factored in, the price escalates, adding another factor to consider—financing the project.
Bathroom Remodel Financing Options
Much like how the price of your project depends on a variety of factors, so too does the financing option you choose. In the long run, the most affordable way to finance your project is to save up the money on your own, but for some, that’s not an option. The good news is that there are a few other ways to secure a home improvement loan and get the bathroom of your dreams.
Home Equity Loans and Home Equity Lines of Credit (HELOC)
Both home equity loans and home equity lines of credit (HELOC) are financing options that leverage the value of your home. To obtain one, you’ll need to have a certain amount of equity, or the difference between your home’s market value and the balance of your mortgage. Because a bathroom remodel can add to the value of your home, increasing equity, this lending option may make sense.
Typically, though not always, lenders require that borrowers have at least 15% to 20% equity in their home, so new homeowners may not have this option available to them. Additionally, though these loans often come with low interest rates, keep in mind that they are secured, using your home as collateral. As such, you must be confident you can afford the payment for the duration of the loan term.
Personal loans are a common method for financing a home improvement and they can work exceptionally well for remodels, particularly when you need the money fairly quickly, as some personal loan lenders can get funds to borrowers in as few as one to three days. Additionally, today’s financial market has created a booming online lending environment, where even consumers with poor credit can secure home improvement loans.
Keep in mind that your credit score will likely play a significant role in your rates, determining how affordable the loan will be, both in terms of monthly payments and interest paid. As such, it’s important to check your credit score before the application process begins. If your score can be improved and your project can wait, you may want to wait a few months, as a better score can save you significant money over the course of your loan.
Before you sign a loan agreement, always review rates and terms, factoring in not only the expected monthly payment, but the total interest you’ll pay over the life of the loan. In contrast to a home equity loan, personal loans are typically unsecured. In other words, if you fail to repay an unsecured personal loan you will not necessarily lose your house.
Didn’t know personal loans could be used for remodeling a bathroom? Check out what else a personal loan can be used for.
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You may be tempted to use a credit card to finance your project, and though it’s plausible, there are a few things to keep in mind. Unless you’re taking advantage of an introductory 0% financing offer and can pay down the debt in the promotional period, credit cards can quickly become an expensive way to remodel. With an average APR hovering around 16% (and frequently more), interest can accumulate quickly.
If you can secure low interest rates and low costs, then it may be worth considering; however, if you’re already carrying a balance, have a high interest rate, or can’t pay it off quickly, consider your other options first.
Store & Company Financing
Personal loans and home equity loans aren’t the only way to complete your project. Today, many home improvement stores and companies offer lines of credit that can be used for home improvement projects. Some of these companies may even offer 0% introductory financing for qualified customers.
If you’re considering financing through a store or company, make it a point to thoroughly read the terms and conditions and evaluate the rates. Missing a payment or carrying a balance past the promotional period may end up costing you.
Among all the home improvement projects that fill to-do lists, remodeling your bathroom can prove to increase your home equity. However, if you’re like many homeowners, you’ll need to secure financing to get the job done. Before you dive in, always consider the immediate and long-term financial impact, taking into account the rates, terms, and interest paid over the course of the loan or line of credit.
Author: Jeff Gitlen
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