Whether you’ve just recently moved in or have lived in your home for a while, it’s natural to want to update it and make it your own. If you specifically want to expand your square footage, you should plan it thoroughly and ensure your budget can cover all the remodeling expenses. The cost of home addition can easily go up depending on the materials you choose and other complications that may arise.
That said, before hiring a contractor to build your home addition, consider your options for paying for the project. Here are some of the most recommended ways to finance a home addition.
Home Equity Line of Credit (HELOC)
This type of financing can be a first or second mortgage that draws on your equity. It is a variable rate line of credit secured by your home, which means you are borrowing against the available equity in your home. That equity can provide a low-cost funding option as a credit line.
Home Equity Loan
This type of loan is given as a lump sum. It is a fixed-interest rate loan based on a percentage of your home equity, but has no draw period. You must start making monthly payments as soon as you obtain the loan. A home equity loan may be appropriate if you know the amount you need for a specific home project and want more stable financing.
Simple Home Improvement Loan
This loan has a competitive fixed interest rate, a set borrow amount and a repayment period of up to five years. Because the loan is unsecured, you are not required to use your home as collateral.
For smaller one-time projects like kitchen remodeling, a credit card may be all you need to make your home renovation dreams come true. You should pay off the balance in full each month to avoid interest charges, which are typically higher on credit cards than on other types of financing.
You can use the extra accounts to fund your home addition project by replacing your existing mortgage with a loan for a higher amount. However, this requires you to have significant equity in your property.
Are you still looking for a home remodeling contractor? Design Build Remodeling Group of Maryland is the right team to call! Call us at (443) 300-2268, or fill out this contact form to schedule a consultation.