31% of Homeowners Went Over Budget on Renovations This Year. This Borrowing Option Makes That Less Problematic

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It could give you a lot more flexibility. 

One of the trickiest things about renovating a home is figuring out how much it will cost. That’s because there are so many different variables to consider.

First, there’s the cost of materials. You might budget a certain amount for new tiles or cabinets only to run into supply chain issues that force you to choose another option that’s far more expensive.

Then there’s labor to think about. You might assume you’ll be able to tackle certain tasks yourself only to get in over your head. And at that point, you might need to pay more to bring in a professional or otherwise risk damaging your home and injuring yourself.

Even if you ditch the DIY routine and decide to completely outsource a home renovation from the start, you might still end up having to spend more than what your contractor estimates. After all, it’s called an estimate, not a guaranteed bill, for a reason.

That’s why it’s so important to choose the right borrowing option when you’re financing a home renovation. And in that regard, a home equity line of credit, or HELOC, could be your best bet.

When you need flexibility

In Angi’s most recent State of Home Spending report, 23% of homeowners who did renovations this year went over budget by under 20%, while 8% of homeowners who renovated went over by 20% or more. If you take out a home equity or personal loan to cover renovations and your costs come in higher than anticipated, you could end up in a tough spot. That’s why using a HELOC could make more sense.

A personal or home equity loan requires you to borrow a lump sum of money upfront. A HELOC gives you access to a line of credit you can draw from as needed over a preset period of time — sometimes up to 10 years.

So, let’s say you estimate the cost of an upcoming renovation at $10,000, only it winds up costing $12,000. If you commit to a $10,000 personal or home equity loan, you’ll be out of luck, or you’ll need to scramble to borrow an extra $2,000 after signing your original loan.

If you take out a $15,000 HELOC, on the other hand, you’ll have the option to borrow the full $12,000 you need. You can then leave the remaining $3,000 alone so you’re not racking up interest on money you don’t need for the project.

Make your renovations less stressful

Renovating a home isn’t easy. It can be a time-consuming process that upends your life, especially if you’re doing something major, like a kitchen remodel.

That’s why it pays to consider a HELOC as your optimal financing option. That way, you won’t have to worry about not having enough funds to complete your project if your costs throw you for a loop. Instead, you’ll be able to focus on finishing the work as quickly as possible so you can enjoy your updated home and get back to your regular life.

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