Everybody fantasizes about buying their dream home someday. Even if you don’t live in an upscale palatial mansion worthy of being on “MTV Cribs,” being a homeowner means you can transform your home to make it the one of your dreams.
For many people, the only thing that stands between them and transforming their home is they don’t have the necessary funds. The average cost of home renovations in the United States is upwards of $40,000, with high-end renovations soaring into the hundreds of thousands of dollars. That’s right—some renovations can cost as much as a mortgage, but you don’t have to let that hinder you from giving your home the makeover of your dreams. Continue reading to learn some of the many ways you can finance your home improvement project.
Your first home probably won’t be your dream home.
Every homeowner can have the house they’ve always wanted, but sometimes, you have to put some extra work into it. If you’re a first-time homebuyer and you’re on a budget, you have to be willing to forego some of the luxury amenities you’ve always wanted—at least in the beginning.
If you approach the home buying process with the mindset of turning your home into your dream home over time, you can find something wonderful in your budget and make it your passion project. FHA loans allow you to borrow up to 110% of the home’s value. With FHA loans, no deposit home loans, or another type of mortgage for first-time buyers that reduce their down payment, if you’ve been saving for a while, you can use what you saved for your down payment towards your renovations.
Also, purchasing a home that’s below the value of your loan amount allows you to use the rest of the funds from your loan for remodeling as well. The key is to be crafty and use the tools at your disposal, and with time, you can turn your starter home into the one you want to finish in as well.
Use your home equity.
If you’ve been in your home for a while and have significant equity, getting a home equity loan is a great way to pay for home improvements. By using your home equity, you can get enough money to get that in-ground pool you’ve promised your family for the past five summers.
Installing a pool in your backyard is one of the more expensive home improvements, and even if you don’t want to get another loan, you can still get financing from most pool builders. Of course, the better your credit score is, the better your interest rate will be, so if you want an in-ground pool, you need to start working on your credit score so you can get a loan or financing. The point is before you install a pool in your backyard, you’re going to have to prepare financially.
Set up a savings account for home renovations and maintenance.
Saving and budgeting are parts of adulting, and as a homeowner, you’d be wise to make home renovations part of your budget. It would be best if you set up a savings account for maintenance so you’ll always have money for repairs in case of issues with plumbing, your roof, or any other part of your home.
The rule of thumb is that you should save between 1% and 5% of your home’s value for maintenance and simple home improvement projects. At the end of each year, any money you don’t use for maintenance can be put aside for larger home improvements like your man cave or the in-ground pool.
Have a yard sale.
Indeed, you probably won’t make enough money from a yard sale to get the in-ground pool with the pool heater your family wants, but it’s still a great way to make some extra change. The money from your yard sale could go towards smaller things like wallpaper or cabinets for your kitchen or other small home accessories.
The best way to get the home you always dreamed of is with home improvements throughout the years. If you’re smart about using the financing tools at your disposal, you can make your dream home a reality.