How to finance a kitchen remodeling

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Find the best personal loan

If you choose to take out a personal loan, you will likely pay a lower interest rate than you would if you paid with a credit card. To make sure that you are getting a good personal loan interest rate, compare multiple lenders.

With some lenders, you can choose between a secured or an unsecured loan. A secured loan means putting something valuable – like stocks, art, or a retirement account – on as collateral. If your credit score is low, you may find it easier to obtain secured credit. But be careful: if you fail to make the agreed payments, the lender has the right to take possession of the collateral and sell it.

Also, ask the lenders about their other fees. For example, some charge early repayment penalties. Don’t just pick the first lender you find. If you shop around you can make sure that you are finding the best personal loan for you.

2. Credit cards

If you are planning a minor remodel and can get the money back quickly, you may want to pay for your kitchen remodel with credit cards. A 0% promotional credit card is a great way to borrow money with no interest – as long as you can pay off the card before the higher interest rate kicks in (you usually have a little over a year to pay off the card ). If you go down this route, plan more than just the minimum monthly payment for the card.

3. Cash-out refinancing

If you have enough equity in your home, a cash out refinance is another way to pay for the kitchen remodel.

Here’s how a cash out refinance works: let’s say you currently owe $ 200,000 on your mortgage and have a budget of $ 40,000 for your remodeling project. You could refinance a $ 240,000 mortgage (the amount you owe plus the money for your home improvement). Then you would get that $ 40,000 in cash to pay for your kitchen remodel.

4. HELOC

A home equity line of credit (HELOC) also allows you to use the equity on your loan. As a homeowner, you can apply for a loan from your mortgage lender up to the amount approved by the lender. Once you’ve paid back part of the loan, you can borrow it again – similar to a credit card. This is also known as a second mortgage.

5. Home loan

With a home equity loan, you provide your home as collateral. You receive the money for your home improvement project in a lump sum and then pay the loan back monthly.

6. Federal programs

One final way to finance home improvements is government loans. The Section 203 (k) program is offered by the US Department of Housing and Urban Development (HUD). It allows you to take out a new mortgage or refinance your existing one and include the cost of home renovation in the loan. There are limits to how the funds can be used, but they usually cover things like bathroom and kitchen renovations.

When you know how to finance a kitchen remodeling, you can make your dream kitchen come true. Before you begin, work your budget in, decide how much you can afford, and go into your kitchen renovation project with a clear financial plan.


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