Financing Options for a Kitchen Remodel Can Make Your Wish Come True
Kitchen renovation by Grace Construction
The last few years have been trying times for many and the thought of a kitchen remodel post-COVID may seem like a daunting task. It may also seem like an idea that can be put off until economic stability returns. But if it’s on your wish list let's talk about financing before you push it further down the list. There are several ways you can afford it through financing and you may only want to finance a portion of it. It will take some research and ultimately paperwork but building a plan and budget may work to make your wish come true sooner than you would expect.
Just to lay the groundwork and at the risk of giving you sticker shock, the average price to remodel a kitchen in 2021 ranged from around $12,500 to $35,000 and costs certainly went up during COVID when demand was at its highest. Now that demand is waning you may be able to negotiate a lower price which can offset higher interest rates. Ultimately, the cost will depend on your goal so don’t let the sticker shock linger.
Nerdwallet recommends first considering an unsecured personal loan, which is relatively fast and convenient. Qualifying depends on the price of the project, your credit, how much equity you have in your home, and again, your goal with the project.
Other options include
Home Equity Loans
Cash-out Refinance
FHA 203k/Fannie Mae Homestyle Loans
Construction Loans
Let's take a look at these in a nutshell:
Home equity Loans and Cash-out Refinance work well if you're established in your home and have built up some equity so they are not ideal for new homeowners as your options are based solely on your equity. FHA and Fannie Mae may be better options for new homeowners because they allow you to borrow against the value of the finished renovation. Unfortunately, they will always come with more hoops to jump through but if you have the fortitude it is worth it.
If the above seems more involved than you would like there is always the option of using a credit card, but you should be aware of the drawbacks. Rocket Loans warns, "You may only have up to 18 months to complete your renovations if you’re planning to use a credit card during a promotional no-interest period. And to avoid the potential consequences that come with using a credit card, you should abide by a strict repayment schedule to avoid any late fees or mounting interest."
If the thought of sifting through all of the options and spending long hours researching and applying is already making you weary let's look at what you will end up with in the end. A kitchen remodel will not only improve your living situation but will add to the value of your home substantially. Remind yourself as you consider the options that if you're patient you will finish with an immediate recovery of at least half of what you spent.
The industry's standard in 2021 for mid-range kitchen renovation falls between 50% to 60%. For instance, if you spent $70,000 redoing your kitchen, then you can expect to recoup around $35,000 to $40,000 upon completion of the project and that value will continue to go up.
The moral of the story is, don’t give up on your wishes just yet! There are a wide range of possibilities for financing a new kitchen and many are just a phone call away!
