2023 HOME EDITION
TOP TYPES OF FINANCING
exactly on budget,” Bernhard said. “If you get halfway through the proj- ect and you realize that everything is becoming more expensive and we’re running out of money, you might be putting yourself in a bind.” Other nancing options for home renovations include cash-out re nanc- ing, nancing through contractors, or using a personal debit or credit card, Bernhard said. Due to a rise in interest rates in recent years, re nancing has been a less popular means for home renovations, he said. The best nancing method for home renovations depends on each individ- ual’s situation and the cost of the proj- ect, said Joe Gonzalez, assistant vice president of consumer lending and lending innovation for University Fed- eral Credit Union. “It’s just like any other thing that you would budget for,” Gonzalez said. “See what your budget looks like, and then set a goal, and then set it aside and start saving for it.” Bernhard recommends taking out an A second loan on a home based on home value minus how much is owed Home equity loan Pro: xed interest rate and payment for a set term Con: can’t adjust loan amount based on project cost Paying for projects in real time or at a later date with personal funds Personal debit or credit card Pros: helpful for more a ordable projects, easier access to funds Con: possible to run out of funds with no option for home equity nancing
An adjustable line of credit based on home value minus how much is owed Home equity line of credit Pros: more exibility on what is owed, only interest paid for what is drawn Con: unpredictability of adjustable interest rate Paying for projects with money you’ve accumulated over time Cash from savings Pro: based o of personal savings accumulated over time Cons: takes time to build up and withdraw necessary funds
additional savings account for home improvement projects and depositing what a monthly loan payment would be on a project before beginning to assess if it is nancially feasible. Weighing the decision While interest rates and in ation continue to a ect the real estate and home renovation markets, industry experts said Austin remains an attrac- tive option for both potential buyers and homeowners. Solis said Central Texas home- owners will “never lose money” by spending money on renovations. “If you know you’re going to stay there and you have no plans on leaving for quite a while, I wouldn’t worry about [getting your money back when you sell],” Solis said. “Do it the way you want it. Who knows how the market is going to go.” Replacing a home loan with a larger loan and keeping the extra cash Cash-out re nancing Pros: nanced for up to 30 years, potentially lower interest rates Cons: long-term nancial commitment; interest rates depend on market Financing through contractors Contractors from companies such as Home Depot and Lowe’s nance projects Pros: all work is handled by one company; process may be easier Con: contractors may in ate project costs or nancing fees
Homeowners have multiple options to nance a home renovation, each with its own pros and cons depending on the type of project and situation of the homeowner. SOURCE: UNITED HERITAGE CREDIT UNION COMMUNITY IMPACT
FINDING THE RIGHT CONTRACTOR
the home value minus what is owed, said Jake Bernhard, vice president of real estate lending for United Heri- tage Credit Union. The amount of home equity lines of credit, or HELOCs, issued by UHCU increased by 154% from 2019-22. Many of the HELOCs were used to nance home renovations, Bernhard said. “A lot of people feel that they’re stuck in their current house because they’re focused on what their cur- rent mortgage rate is,” Bernhard said. “They’re limiting themselves into stay- ing in their house, and then doing the HELOC to maybe make their house into what they want the house to be.” A home equity loan functions as a traditional loan with a xed interest rate and closing costs, Bernhard said. With a home equity line of credit, homeowners can draw out funds grad- ually, only owing money and paying an adjustable interest rate for what they need with no closing costs for amounts $200,000 or under. “Very rarely does the project stay
Three home renovation experts in the Greater Austin area have advice for homeowners looking for contractors to renovate. • Staying on budget is important, but don’t focus solely on the price. • Look deeper and see what the contractor can o er to make your vision come to life in a realistic way. Adnan Cokadar, Cabinetto • Although not every single customer will be able to be satis ed, read as many reviews as possible to see the general consensus. • Experience is important; ask how long the team has been together and how they operate. Charlie Solis, Austin Jones Company • Don’t just choose someone because they’re inexpensive. • Trust your instincts. Ido Pistiner, Together Design & Build SOURCES: ADNAN COKADAR, CABINETTO; CHARLIE SOLIS, AUSTIN JONES CO.; IDO PISTINER, TOGETHER DESIGN & BUILD
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NORTH NORTHWEST AUSTIN EDITION • AUGUST 2023
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