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Smart Ways to Finance Home Improvements

a woman painting the inside of her home
By: AffinityFCU

Date: October 28, 2022

Whether you’ve been penny-pitching for a kitchen remodel or need fast access to cash for a new hot water heater, home improvements come at a steep cost and recent inflation has only added to the price tag. In addition to rising costs, the recent transition to remote work has also amplified the desire for more comfortable and larger living spaces. Fortunately, your garage conversion or new HVAC system doesn’t need to be as far away as you might think.

The consumer price index reported1 the cost of goods measured in the survey to have increased 8.2% in the last year. This has impacted the cost of basic home improvement materials and supplies ranging from new appliances to flooring. The good news is that home prices have increased an average of 13.5%2 in 2022, and while that’s expected to slow down, a small increase is still expected in 2023. This means investing in your home will continue to be a worthwhile investment. Here are two options to consider when thinking about financing a renovation:

Use Your Home’s Equity

The rise in home values means homeowners are likely to have equity available to leverage for home improvements that are urgent or will increase the value of the home. One way to access a home’s equity is with a home equity line of credit (HELOC). A HELOC is similar to a mortgage and uses the value of your home to allow you access to capital. This is best leveraged for home improvement projects that will further increase or preserve the value of the home. HELOC rates start as low as 6.25% APR3 at Affinity with repayment periods of 20 years, which means borrowers can have low manageable payments. This is important when you are considering if you should save for a renovation or if you should finance it. When inflation is raising costs at a rate that is higher than the interest rate of a loan your dollar is likely to go farther with the finance option and allows you to enjoy the improvements for longer.

Non-Collateral Loans

For recent home purchases that might not have enough equity to tap into, a personal loan can offer a solution for emergency home repairs or improvements. Personal loans4 typically have a higher interest rate but are a good option to explore if comparing financing options from a service provider or store. Often personal loans offer a fixed-rate option that is more competitive than store or contractor credit options that have enticing terms for a small period of time and then increase exponentially.

Home improvements can be a scary undertaking for even the most seasoned homeowner. An Affinity team member can help you decide if a HELOC or a personal loan is a fit for your personal situation. They can also help you pick a loan and repayment plan that works for you and your family so that you can tackle your home improvements without additional financial stress. Call us at 800-325-0808 or visit our website for more information on all of our financing options.

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition.

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