A beautiful kitchen can give your home new life, whether you plan on living there for decades to come or you’re considering putting the home on the market. But kitchen remodels can quickly climb into the tens of thousands, and trying to set money aside for your remodeling project can take years before you get to make the changes you’re dreaming about. Flexible financing options like a home equity loan for remodel projects can give you access to money now without the drawbacks of a traditional loan. Take a closer look at how home equity loans for kitchen remodels work and what the benefits are.
Home Equity Loan vs. Home Equity Line of Credit: What’s the Difference?
Homeowners can use their home equity to fund different projects and expenses. There are three main tools you might be familiar with:
- Cash out refinancing, which resets your mortgage loan and allows you to pull money “out” of your home
- Home equity loans, which use your home equity as collateral but don’t affect your mortgage payment
- A home equity line of credit (HELOC), which also uses home equity as collateral but acts more like a credit card than a loan
For projects like a kitchen remodel, home equity loans and HELOCs are two of the most popular options. While they sound similar, there are some key differences to keep in mind. With a home equity loan, you’re given a lump sum of cash and have very clear repayment terms with a fixed monthly payment. HELOCs give you access to revolving credit that you can withdraw and pay back in repeated cycles; HELOCs typically have variable interest rates and interest-only repayment periods.
Benefits of Using a Home Equity Loan for Remodels
For one-time expenses, it’s often best to choose a home equity loan. The terms are clear and stable, which can make using a home equity loan for remodel projects less stressful. Some of the advantages of using a home equity loan are:
- You can get quotes for the kitchen remodel you have in mind, and use those numbers to request your loan. This gives you a clear budget.
- A loan is a one-time sum of money, so you don’t have to worry about budget creep and spending more and more, like you might see with a HELOC.
- Some kitchen remodeling companies work with lenders to create a clear budget and financing plan so homeowners can start the remodel with more peace of mind.
- You don’t have to save money ahead of time or worry about the high fees and interest rates of standard loans.
- Kitchen remodels can increase the value of your home, adding even more equity.
Potential Drawbacks to Remodel Loans
However, when you’re considering any loan, there are some potential drawbacks to keep in mind. Once you agree to the loan, you have a set schedule with fixed repayment terms. Late payments could result in the lender placing a lien against your home or charging you late fees. A loan is also a one-time sum of money, so it’s important to shop around and get quotes from kitchen remodelers early on so you know how much to borrow.
What’s the Average Cost of a Home Remodel?Â
The average cost of a kitchen remodel project is around $26,971, and the price can change based on your location, the scope of the remodel, and the size of your kitchen. However, that investment can be well worth it. According to the National Association of Realtors, a kitchen upgrade scores 10/10 in their joy score for remodeling projects, and you can get around 60% ROI on even minor kitchen upgrades when you’re ready to sell your home.
Talk to Us About Maximizing ROI From Your Remodel
At Reliable Home Improvement, we work with Naperville-area homeowners to build their dream kitchens without stretching their budgets. As a winner of the “Best of Naperville” award for remodeling for multiple years, we have the experience and expertise to bring your vision to life. Tools like home equity loans can give you the funds you need to upgrade and modernize your kitchen with an affordable repayment schedule. Reach out today to learn more about using a home equity loan for remodelling or to start planning your renovation.