A home extension is a dream of many people. It requires a significant amount of time and money to be invested in it. But the return on investment of a home extension is stupendous. A home extension, for example, an extra bedroom, significantly increases the value of the property. Before going for a home extension, we must have a clear plan in mind. This is essential as it helps us to decide a proper budget for the entire home extension. This streamlines the process, and things can be carried out smoothly. Financing a home extension can be a task, but there are various ways to finance a home extension.
Personal savings can be useful for smaller home extensions. The pros of using personal savings are that one can quickly pay off the money, but it can only be used for smaller amounts. The cons of using personal savings are that the prices of materials and other things required of home extensions fluctuate and can, in the long run, finance it can deplete the personal reserves.
Personal Unsecured Loans
One can finance a home extension through personal unsecured loans. These can be obtained via peer-to-peer lending channels. To approach peer-to-peer platforms, we need to first pitch our requirements to them. If approved, the money is transferred quickly, and the interest rates a considerably fixed. This helps in obtaining a stable supply of money for the home extension. Unsecured loans mostly depend on the buyer’s history how well they manage and repay funds.
Using credit card payments is a viable option when it comes to small or medium-sized home extensions. If one decides to use this payment route, it must be made sure that the deal is on 0% introductory rate, or else a considerable interest would have to be paid by the person. Generally, credit card payments are usually higher due to higher interest rates, but it can come as a handy option for financing home extensions. Before using credit cards, one must carefully consider the repayment plan. One must also be careful while using credit cards, as there are many hidden fees associated with this type of spending.
Mortgage refinancing is one of the traditional ways of financing a home extension. The benefits of this kind of financing are the low levels of interest rates than other options. There is an advantage of negotiations with the lenders. Another advantage of mortgage refinancing is that the money is available in a lump sum. This proves helpful while hiring contractors and with their payments. But this type of financing also comes with its downsides. An arrangement fee has to paid while getting a loan on the property’s equity. Also, there can be many penalties if one reduces the loan or sells the property before the stipulated agreed-upon time frame.
The second mortgage is a type of loan where the first loan deal remains the same, and another lender gives you a double deal. With a second mortgage, one has to repay the mortgage loans at the same time. While availing of this home financing option, care must be taken, as borrowing increases considerably. Often, the interest rate can be higher than the current rate of interest of the first deal.
Remortgaging the Home
Remortgaging is transferring the existing mortgage to another provider. It helps to raise cash funds. This helps in committing a more extended repayment plan when one switches to a new mortgage. The advantage of this type of home financing is that one can raise funds quickly. The risk of such financing options is that if the repayment is not made correctly, the home will be repossessed by providing the loan. Before taking the plunge to avail of this loan, one must consider all the positive and negative aspects. Once there is the surety of repayment of the loan, only then must one continue with the option of re-mortgaging the home to raise money for a home extension.
Bridging loans are mostly useful for small home extensions and renovations. These loans are used to fund a down payment of a new home before the existing property is sold. Bridging loans have a higher chance of approval than a second mortgage. These types of loans are especially beneficial for people who wish to sell their property soon. Interest rates a usually high for these loans. Thus, care must be taken before one opts for this home extension financing option.
The different types mentioned can be used to finance home extensions. Depending on the requirements, one can use any of the above methods to raise funds for a home extension.