3 Ways to Fund Your Home Renovation
If you're planning a home renovation, you may be wondering how to best finance the project. Should you take out a loan, enter into an equity sharing agreement, or borrow from your 401k? Here are a few things to consider before making a decision.
If you have equity in your home, you may be able to get a cash-out refinance to help fund your renovation. This type of loan allows you to borrow against the equity you've built up in your home, using your home as collateral.
One advantage of a cash-out refinance is that you may be able to get a lower interest rate than you would with a personal loan or home equity loan. However, this type of loan does come with some risks. If you're unable to make the payments on your loan, you could lose your home.
Equity Sharing Agreement
Another option for funding your home renovation is an equity sharing agreement. With this type of agreement, you would sell a portion of your home's equity to an investor in exchange for the funds to finance your renovation.
One advantage of an equity sharing agreement is that you won't have to make any monthly payments. However, you will give up a portion of your home's equity, and you may not be able to sell your home or refinance your mortgage without the investor's consent.
If you have a 401k, you may be able to take out a loan against it to fund your home renovation. One advantage of a 401k loan is that you won't have to pay any taxes on the money you borrow. However, you will have to pay interest on the loan, and if you can't repay the loan, the money will be taken out of your 401k account.