Of course, you need to determine exactly what you will and will not be doing when it comes to a home improvement endeavor. You need to delineate specifically the nature and extent of home improvements you will undertake.
Another key consideration that you must address when you are contemplating a home improvement endeavor is budget and finance. You need to develop a definite budget and have a reasonable action plan as to where the money will be coming from for your home improvement project.
You may be in a position at which you have money in the bank that permits you to pay for your home improvement effort as it progresses. On the other hand, if you have a more ambitious home improvement or remodel project in mind, you may lack the cash on hand necessary to pay for a project from your pocket as it progresses. You may be in a position where you need to obtain a loan to assist with your home improvement plan.
Home Improvement Loan
There is a specific type of loan available today specifically for a person who wants to fund a home improvement project. A home improvement loan typically is secured with a supplemental mortgage on the residence. With this type of financing, you need to make certain that you have the equity necessary in your residence before you submit an application for this type of loan.
There is no specific formula regarding the equity available in your residence sufficient to support a home improvement loan application. With that said, and with the uncertainty that exists with the housing market since 2007, you will want to have some breathing room when it comes to the equity in your residence and the amount you want to borrow for a home improvement loan.
Another type of financing option that might be available to you when you want to finance a home improvement project is to open a line of credit with a lender. Typically, the line of credit would be opened through the lender that has your home mortgage.
With a line of credit, you apply for and obtain approval from a lender to seek incremental loans from that institution as you require that type of assistance. Unlike a home improvement loan, which has a specific purpose, a line of credit does not have this type of focus. Generally speaking, if approved for a line of credit, you technically use the money available through that arrangement for nearly any purpose. Typically, a line of credit is secured by your residence. In that sense, it is a type of home equity loan.
The Biggest Mistake You can Make by Financing Home Improvements
A person who essentially pays cash for home improvements tends to be more conservative with spending than an individual who obtains financing. There is just something about spending "real money" as you go along with a home improvement project that tends to contain spending, at least to some degree.
The biggest mistake you can make if you obtain financing for a home improvement project is to overspend. You simply cannot think of a home improvement loan or an equity line of credit as some sort of blank check, because it is anything but.
Budget then Borrow
More than a few people base what they are going to do for a home improvement project based on how much money they can obtain through a loan. In reality, that definitely is putting the cart before the horse.
If you want to embark on a home improvement project, you need to budget first, then borrow (if necessary). You need to draft a conservative and yet realistic budget, and then begin the process of determining how you will finance your efforts. Consider discussing your plans with other folks who have embarked on home improvement efforts similar to your own. They may have solid suggestions for budgeting strategies you can employ on your own home improvement project.
You will also want to nail down bids from different providers and contractors that you will need for your home improvement endeavor. If you are doing work yourself, this is also the phase where you will get your own cost estimates for material and supplies.
Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, where you can get personal checks and business checks.