3 Quick & Easy Solutions to Kitchen Remodel Financing

Did you know that remodeling your kitchen not only makes you happier, but it also makes you healthier? Needless to say, if you simply can’t stand your current cooking space, there are more good reasons than you think to renovate.

The price tag that comes with upgrades, however, is not one of them. While costs associated with increasing kitchen size, splurging on countertops, or replacing appliances can be vast and varied depending on the scope of your project, even minor remodels of a small kitchen will likely set you back over $10,000.

The good news is that even if you don’t have the cash in the bank to fund the changes you’ve been dreaming about, there are plenty of ways to secure kitchen remodel financing, from personal loans for kitchens to home equity loans.

Before you decide which avenue is best for you, get to grips with exactly how much you think your renovation will cost, what kind of lending option is right for your financial situation, and whether you meet some of the basic qualification requirements to receive funding.

 

How Much Does It Cost to Remodel a Kitchen

Every year, roughly 1 in 10 American homeowners remodel their kitchen, according to the National Kitchen & Bath Association (NKBA). And of the millions of people who undertake these replacement or renovation efforts, nearly half of them budgeted more than $15,000.

That doesn’t mean you have to spend this much — or that you have to limit your spending. The amount of money you pour into your upgrade is up to you, but a recent survey by Houzz found that the average spend on a minor remodel of a small kitchen is $13,700 and the average spend on a major remodel of a large kitchen is $42,000.

To calculate exact costs, use a kitchen remodel estimator and make sure you get multiple competing quotes from contractors (if you’re not making changes yourself).

Kitchen Remodel Financing & Loan Options

  1. Personal Loans for Kitchen Remodel

One of the best ways to finance a kitchen remodel is to take out a personal loan for home improvement. This method of borrowing is especially ideal for those who’ve just purchased their house or who don’t have a lot of equity accrued yet, as it doesn’t even require home ownership - let alone a down payment or equity. 

You generally just need a healthy credit rating, proof of employment, and a strong debt-to-income ratio to qualify for approval. Not to mention, thanks to the boon in online lenders, like Eloan, it’s faster than ever to apply for these kitchen remodel loans and immediately check your rates, and if you’re approved, you can get your money in as little as one business day.

Personal loans work by lenders depositing a single lump sum of money directly into your account. Then, make monthly fixed payments according to the agreed rates and terms.

Pros of Personal Loans

Cons of Personal Loans

No home ownership or equity required

Loan maximums tend to be around $35,000 - $40,000

Quick and easy application process

Interest rates slightly higher than home equity loans

Fast transfer of funding to your account

 

 

  1. Home Equity Loan for Kitchen Remodel

If you’re a homeowner who’s made a fair dent in their mortgage and waited far too many years to make some long-awaited changes to your kitchen, a home equity loan for a kitchen remodel may be an ideal funding avenue to consider.

This kind of renovation financing allows you to tap into a portion of the equity in your home, which means that you can possibly access a larger sum of money than what personal loan lenders will grant you.

On the flip side, it’s critical to understand that these loans are secured by your home, so if you don’t make your loan payments, you could lose your house. Not to mention, you’ll still need to pay your mortgage — this loan is merely an added expense.

The good news is that the interest rates associated with home equity loans tend to be lower, on average, than those associated with many other financing options. They’re also fixed, and repayment is expected on a monthly basis.

 

Pros of Home Equity Loans

Cons of Home Equity Loans

Access to large sums of money (80 to 85 percent of your home equity)

Your home is at risk if you default on your loan

Low-interest rates, compared to unsecured loans

Additional appraisal fees (possibly)

Tax deduction opportunity

 If property values fall, you could pay more on your home than it’s worth

 

  1. Cash-out Refinance for Kitchen Remodel

 

Like a home equity loan, a cash-out refinance allows you to leverage the value you’ve built up by making your mortgage payments to access a large lump sum of cash. Unlike a home equity loan, however, this financing option actually replaces your old mortgage with a new, larger mortgage, giving you the difference in cash.

The most important point to know about cash-out refinance loans is that because you’re going through the process of applying for an entirely new mortgage, you’ll also be getting new rates and will be subject to some of the same fees that you originally paid (e.g. closing costs and appraisal fees).

Needless to say, if you can get a lower interest rate than your existing mortgage, then this may be a great way to reduce your payments and get access to cash to complete your kitchen remodel. If the interest rate you qualify for is higher, then this probably isn’t your best option.

Finally, be aware that cash-out refinance loans have a different rate and term structures, with some carrying fixed rates and others carrying adjustable rates. Take the time to understand these nuances and how they’ll affect your new mortgage payment-cum-kitchen-remodel-loan.

 

Pros of Cash-out Refinance Loans

Cons of Cash-out Refinance Loans

Access to large sums of money (typically up to 80 percent of your equity)

Your home is at risk if you default on your loan

Low-interest rates, compared to unsecured loans

Additional appraisal fees and closing costs (possibly)

Tax deduction opportunity

If property values fall, you could pay more on your home than it’s worth

 

Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.  The information contained herein is for general informational and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. The information or opinions contained herein should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service.

 

 

 

The information contained herein was prepared for general information and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. Eloan a Division of Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice. Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.