cash for your remodeling plan
New bathrooms, an updated kitchen, a finished attic -- remodeling project choices are many. Fortunately, there are also many ways to finance a do-it-yourself home makeover.
No matter what job weekend
warriors take on, experts note, it's important
to ask two questions first: How much money
do I need, and for how long? Pin down those
details, and it's easier to choose between
a home equity line, cash-out refinancing and
good old plastic.
"How long are you going
to pay for it? Will it take you less than
a year to pay off? If so, then maybe consider
using a tax refund," says syndicated
financial columnist Ilyce Glink. "Will
it take 20 years? Then maybe a refinance makes
sense. Once you determine this, then you can
decide what option is best."
Financing can be short-, medium-
or long-term. Within each of those categories
there are several choices, each with their
own advantages -- and drawbacks.
Ray Ferrara, president and CEO
of Clearwater, Fla., financial planning firm
ProVise Management Group, says choosing among
financing methods is generally easy, as long
as you have equity in your home, no credit
problems and flexibility on your time horizon.
But there are no rules of thumb,
Ferrara says. It takes an honest assessment
of one's financial situation, not a cookie-cutter
Borrowing a "relatively
small amount," for instance, can mean
different things to different people, he says.
"You would be better off with short-term
or intermediate financing," Ferrara says.
Short-term financing can include opening a
home equity line of credit, or HELOC, using
cash from savings, a credit card or a home
improvement center promotional offer, a construction
loan from a bank -- even a loan from your
401(k) or life insurance policy.
|The best bet
is to look for a loan that will
cost you the least in interest and
allow you to pay it off in as fast
a time frame as comfortably possible,
giving preference to tax-advantaged
|Here is a breakdown of some of the different options as well as pros and cons of each choice: