Renovation – Financial Considerations

Renovations, whether carried out on a small or large scale, can be undertaken only if finances permit. The task involves financial considerations, which then determine the extent and quality of the renovation. The other option is to first decide on the renovations needed and then find ways of financing it. This can be done by liquidating assets, using past savings, or borrowing money from multiple sources available.

Financial considerations-points to ponder

  • Essential renovations needed
  • Available funds in the form of savings
  • Equity amount available in current home
  • Time plan for renovation and whether the money is needed all at once
  • Where renovation costs can be minimized and unnecessary changes discarded from the initial plan.

Financing resources

Renovation decisions are generally not made overnight. They are either the need when an old property is purchased, in which case the new home uses part of his mortgage loan for renovation. Or, an old house, after years of use, shows signs of disrepair, and renovation becomes necessary to prevent the premises from falling apart. In such cases, owners may begin to put aside some earnings every month to collect the money needed. Sale of assets may be another cash raising option by those who avoid the burden of loans. This may include sales of stocks or other financial securities or even other property owned.

For meeting big renovation expenses, a personal line of credit may be the best way to finance the exercise. This provides a sum of money subject to a credit limit that can be withdrawn at any time, and interest is charged only on the amount used. This line of credit may eventually be converted into a mortgage. Banks, financial institutions and private lenders, who fund home loans are the ones offering financing for renovations as well. Pre-approved loans are recommended since these provide a clear picture of the funds available and the renovation can be planned accordingly. Here again, costs of loans in the form of interest, can be minimized by taking a small line of credit which is at lower rates than a fixed installment loan, or taking a secured loan with some asset offered as collateral.

Renovations for returns

While renovations are often undertaken for improving the family’s living style, they are carried out equally often to improve the asset value of the property which will bring higher returns on investment when sold. The only difference is that renovations done for increasing the value of the property are different in quality and specifications with more additions that generally appeal to people rather than personalized to the residents’ tastes. A big part of the renovation investment goes into kitchens and bathrooms and additions like garages and decks besides cosmetic changes that bring instant approval. While providing for general requirements, it is wiser to avoid accessories that may not be used by all. This helps to save money that can be better utilized for other renovations.

Financial considerations are the first and the last word for renovations and must be given due thought and plans formed accordingly.

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