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Homeowners often tackle projects around their home to add value to their property, increase the amount of livable space, or simply improve the appearance.
Remodeling or finishing a basement is a popular way to achieve these goals, but it can be expensive. The price of basement remodels vary greatly depending on the square footage of the area and what’s involved.
No matter what options you choose to cover the costs for finishing your basement, taking on this project can add significant value to your home, which is particularly helpful for homeowners who plan to put their home on the market.
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Costs of Finishing a Basement
The average cost of finishing an incomplete basement ranges from $6,500 up to $18,500. Remodeling a basement that is already finished may cost less. In either scenario, homeowners can save a little on the total cost by doing some work on their own instead of hiring a contractor.
Overall, the expenses included in completing the task depend on several factors. These include:
- Framing and insulating walls
- Adding or improving lighting, plumbing, and other electrical work light outlets
- Rerouting ductwork or adding vents
- Installing ceiling and floors
- Other costs for labor and materials
Not every basement finish or remodel will require each of these expenses, and the total amount for the project will depend on the size of the area and the quality of the materials.
When homeowners’ savings are not enough to cover the out-of-pocket expense of remodeling or finishing a basement, homeowners have other financing options that may help bring the basement of their dreams to life.
Options to Cover the Cost of Finishing Your Basement
Compare Financing Options to Finish Your Basement
A personal loan is one option to cover the cost of finishing or remodeling a basement. Lenders offer personal loans in single lump sums in varying amounts.
This total amount, plus interest charges, is then repaid over the course of several months or several years, depending on the term. Several financial institutions offer home improvement personal loans to homeowners who have a strong credit history and steady income, but the interest rate, term, and other charges of getting a loan vary greatly. It is important to compare the aspects of a personal loan, and the ability to qualify, before selecting a loan option.
Didn’t know you could use a personal loan to remodel a basement? Check out what else you could use a personal loan for.
Home Equity Loan or Home Equity Line of Credit
Alternatively, your home equity can also help finance a basement finish or remodel. Home equity financing comes in the form of a line of credit (HELOC) or a fixed loan (home equity loan). With either option, homeowners use the equity in their home as collateral for the financing.
A HELOC offers flexible access to funding, but it may carry a variable interest rate that increases over time. A home equity loan is similar to a personal loan in that payments and interest are fixed. However, the interest rate on a home equity loan may initially be higher than a HELOC.
Homeowners may be required to have a home appraisal completed as part of the application process, alongside a credit and income check. With either a home equity loan or line of credit, homeowners often have access to much more financing than what a personal loan can offer. For this reason, a home equity loan or line of credit may be a smart choice for those who can qualify.
Other Methods of Financing a New Basement
Homeowners can also save for a basement project well in advance of starting the work. Regularly setting money aside into a high-yield savings account can be a smart way to eventually pay for a basement remodel or finish, but this option can take several years to achieve, delaying your project. This is, however, the most affordable option because there are no interest charges, appraisals, or closing costs.
In some cases, the contractor or company helping with the basement project may offer financing to qualified homeowners. This typically works as a line of credit with a variable interest rate, but some offers have an interest-free period that homeowners can take advantage. Review the terms of contractor or company financing, and compare these against the cost and terms of a personal loan or a home equity financing solution.
Finishing your basement is a smart step toward increasing the value of a home, and homeowners have several options to help cover the up-front costs. Personal loans and home equity financing options are often the go-to for homeowners, followed up by personal savings and contractor financing. The option you select should depend on your ability to qualify for the financing, as well as the short- and long-term affordability of the loan or line of credit.
Author: Melissa Horton
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