We often talk about remodeling or renovating our home spaces. Naturally, we focus on the fun parts—the look we’re going for, the features we want to include, and the accessories and fixtures we’d like to see. Basically, the Pinterest board parts of the project.
We don’t often talk about the other part of the endeavor, probably the most essential—the funding. No matter how imaginative and excited we may get about remodeling and renovating our spaces, this will all amount to nothing if we don’t plan the way we’re going to fund it accordingly.
Renovating vs remodeling
First, we’ll need to get our terminologies straight. The terms are sometimes used interchangeably, but there is a key difference between renovation and remodeling.
Renovation, by definition, is the process of making a space feel like new again. Whether it be restoring a space to its former glory and or refreshing its look to make it more modern, a renovated space functions in much the same way as it did previously.
A remodeling project, on the other hand, is technically a bigger endeavor. Remodeling, by definition, is the process of altering the structure of a space. While some remodels are minor, there are remodeling projects the really require changing the structural features of a place, like building new walls and beams. Some remodeling projects are so big that they may require permits. Generally, these are the home improvements that change the “footprint” of your home, like adding decks or fences or altering the electrical or plumbing system.
Reno. Remodel. Resale.
Apart from these distinctions in terminology, the objectives of your renovation or remodeling project are important to consider. What are you doing these home improvements for? Is it for your family’s personal use or is it simply to prepare your home for resale?
If it’s a personal renovation or remodeling, then think about your long-term needs. These changes to your home can be expensive, and it’s not wise to have to keep changing things up. These projects consume not only your financial resources but generate a lot of environmental waste, too.
With a personal remodel or renovation, you have the chance to really make your home fit like a glove. But you have to balance that with projected or potential changes in your lifestyle. Turning your den into a nursery wonderland is great for the time being, but once your baby grows up, you will pretty much have to change it up again.
If, however, you are simply renovating or remodeling to prepare the space for a new owner, then you can take on with the project with broader strokes. You can just proceed with a renovation project that restores the basic elements of the space, like the wall paint, the flooring, or repairing leaks in the ceiling.
You could, however, consider doing a bigger renovation or a full remodel as an investment. There’s potential in increasing the resale value of a home if you do a more thorough repair and revival of the space.
You can also add more features and amenities to the home to make it more appealing. It will be more expensive, and there is a risk that it won’t actually pay off, but if you’re willing to make the investment, then you might be able to make a bigger sale than expected.
Loans and mortgages
And now on to the most important part: generating the funds for your renovation or remodeling project.
This ultimately depends on the scale of the project. Minor renovations should be something that you can fund with your own, existing money. You could also take out a small loan through your credit card. You could also take advantage of home equity loans or home equity line of credit (HELOC).
Another option is to take advantage of various government housing loans. There’s the FHA 203(k) Rehab Loan offered by the U.S. Department of Housing and Urban Development (HUD). There’s also the rural counterpart in the housing loans offered by the U.S. Department of Agriculture (USDA).
There are also a lot of other renovation loans offered by mortgage providers. As always, you’ll have to plan accordingly and use a reliable mortgage calculator to be able to assess your capabilities. You need these things to create a game plan for your finances. After all, what’s the use of a nice remodeled space if you’re unable to pay for the debt?
It’s always best to be prepared and to know what to expect. Your next home improvement project can be so much more fun and enjoyable if it’s clear how you’re going to be funding it.