With the start of the new year, many people are considering new projects, such as remodeling their bathrooms. After all, we spend more time in these spaces than in most other rooms of our homes. However, remodeling requires a lot of decisions, and often the first one—before choosing materials, colors, and finishes—is how to finance the project. At MariStav, we aim to make the remodeling process easier, including helping you explore various bathroom remodeling financing options.
Option 1: Home Equity Loan
Home equity loans are a popular choice. They offer low interest rates and fixed monthly payments. A home equity loan allows you to borrow against the equity you’ve built up in your home to fund remodeling projects. Unlike cash-out refinancing (explained below), this loan doesn’t pay off your existing mortgage—it simply provides additional cash for updates.
Pros:
– If you have significant home equity, this is a great way to secure funds for your dream project.
– The interest paid on home equity loans is tax-deductible if used for home improvements.
Cons:
– This is a secured loan, meaning it’s tied to your home as collateral. If you’re unable to make payments, the bank can take ownership of your property.
– Interest rates may fluctuate, which could increase your monthly payments.
– Borrowing against your home reduces its equity, which might limit your financial options in the future.
– Home equity loans usually come with closing costs, such as application, appraisal, and recording fees.
Option 2: Home Equity Line of Credit (HELOC)
A HELOC is similar to a home equity loan, but more like a credit card: you borrow up to a pre-approved limit. Once you pay it off, you can borrow again. However, like a home equity loan, a HELOC is secured by your home, putting it at risk if you fail to make payments.
Pros:
– HELOC closing costs are usually low (sometimes even zero!), making it a good option for smaller, ongoing projects.
– You only pay interest on the amount you borrow, not the entire credit limit.
– You can draw funds whenever you need them.
Cons:
– HELOC interest rates are variable, meaning they can rise or fall over the loan term.
– Like a home equity loan, a HELOC is secured by your home, so failure to pay could result in losing your property.
– Borrowing against your home reduces its equity, limiting future financial options.
Option 3: Cash-Out Refinancing
Cash-out refinancing involves refinancing your mortgage with a higher loan amount than what you currently owe, then using the difference (equity) to fund home improvements. This method only makes sense if the new mortgage rate is significantly lower than your current one.
Pros:
– Cash-out refinancing can help you secure the funds you need based on your home equity.
– You can apply a large cash infusion toward improvements that will increase your home’s value.
– You can enhance your property without paying out of pocket.
– Any leftover cash can be used for anything you like, such as buying new towels or a cozy bathrobe!
Cons:
– Cash-out refinancing is only worth considering if the new interest rate is much lower than your current rate.
– There are risks involved, as your home is used as collateral.
– Financing short-term costs with long-term debt can be risky—make sure the improvements you’re financing will increase your home’s value.
Option 4: Credit Card
Many credit cards now offer rewards, and using one for your home improvements might be worthwhile. However, credit cards generally come with higher interest rates than loans, so it’s best to pay off the balance quickly.
Pros:
– Earn rewards while paying for your dream bathroom.
– No collateral is required, unlike with home equity loans.
– Credit cards are easy to use for making purchases.
Cons:
– Credit cards typically have higher interest rates than loans.
– Carrying a high balance can hurt your credit score, which might make borrowing more expensive in the future.
– Credit cards may come with annual fees, cash advance fees, and late payment fees.
Option 5: Personal Loan
A personal loan is a good option if you need funds quickly, as the application process is fast. While no collateral is required, you will likely need a good or excellent credit score to qualify for the lowest interest rates. Rates on personal loans tend to be higher than home equity loans, meaning your payments may be higher, but you’ll pay off the loan faster. If you don’t have much equity in your home or prefer a shorter repayment period, a personal loan might be a good fit.
Pros:
– No collateral is required, so you’re not risking your property.
– Personal loans usually come with fixed interest rates.
– The application process is quick, meaning you can start your remodel sooner.
Cons:
– Interest rates may be higher than those on secured loans like HELOCs if you have substantial home equity.
– Missing payments can hurt your credit score.
– You may need a good to excellent credit score to qualify for the best rates.
Option 6: Financing from MariStav LLC
MariStav LLC offers its own competitive financing solutions for your bathroom remodel, with no collateral required. Loan terms range from 9 to 72 months, with flexible repayment options, including equal monthly payments or programs with deferred payments.
Pros:
– Keep your savings in interest-bearing accounts rather than spending them immediately on renovations.
– You can pay off the loan early without incurring any fees.
– Fast and easy application process with no hidden fees or closing costs.
– Pre-approval for a maximum limit ensures you can handle unexpected expenses during the remodel.
Cons:
– Your credit profile will determine the interest rate you qualify for. If your credit isn’t great, you may face higher interest rates.
Option 7: Cash
Paying for your remodel with cash is the best way to avoid any fees or interest charges. While this method requires financial discipline, it’s a great way to stay within budget. If you prefer to keep cash on hand for emergencies, you can also explore contractor-offered financing, which offers similar benefits to paying cash.
Pros:
– You stay within your budget and avoid additional interest or fees.
– No application processes or hidden costs.
Cons:
– Some homeowners prefer to keep cash in savings for emergencies.
– Withdrawing from savings means losing any interest your money would have earned.
No matter which financing option you choose, MariStav LLC is here to help. During your free in-home consultation, we’ll discuss the factors that determine the cost of a bathroom remodel, including the size and condition of your current space, the fixtures you choose, and the materials you prefer.
Contact your local MariStav LLC to learn more about our financing options and schedule your free in-home consultation today.