|
Type of loan |
Pros |
Cons |
|
Loan against retirement
account (e.g. 401k) |
You pay yourself the
interest on a loan
against your 401k. |
You lose the interest
you could be making if
it was invested. If you
lose your job, most
loans require you to pay
the loan back
immediately. |
|
|
|
Home Equity Loan |
Usually tax deductible.
Lump sum is paid to you
at the start so you have
flexibility of what you
do with the money. Save
money by getting quotes
from 4 or more mortgage
brokers.
Click here to get
the best rate. |
A second loan to manage.
Shorter term than a
standard mortgage.
Requires that you have
sufficient equity in
your home. You have to
pay interest on the
entire loan amount even
though you may not need
the money to pay for
remodeling right away. |
|
Home Equity Line of
Credit |
You only borrow the
money you need at the
time, so finance charges
are lower at the
beginning. Save money by
getting quotes from 4 or
more mortgage brokers.
Click here to get
the best rate. |
A second loan to manage.
Shorter term than a
standard mortgage.
Requires that you have
sufficient equity in
your home. |
|
Construction Loan |
Good for larger remodel
projects and if you
don't have enough home
equity to take a loan to
cover construction
costs. |
Higher interest rate
than home equity loans.
Not tax deductible.
Usually short term until
construction is complete
then replaced with a new
first mortgage. |
|
Loan from the contractor |
Available to most
homeowners. |
High interest rates. Not
the best terms. Can lock
you into working with a
specific contractor. Not
recommended. |
|
|
|
Refinance and cash out |
You only have a single
loan for your home.
Usually tax deductible
interest. A single
larger loan will usually
have the lowest interest
rate. Save money by
getting quotes from 4 or
more mortgage brokers.
Click here to get
the best rate. |
Requires that you have
sufficient equity in
your home. You have to
pay interest on the
entire loan amount even
though you may not need
the money to pay for
remodeling right away. |
|
Credit Cards |
Most homeowners have
this as an alternative. |
High interest rate, not
tax deductible. |
|
Your savings |
The least expensive way
to pay for your remodel.
|
Make sure you don't use
all of your savings.
Always have some
available for emergency. |
