If you’re looking to increase your home’s energy efficiency or reduce its environmental footprint, there are lots of ways to cover the cost — and they don’t all mean draining your savings.
While using savings can be smart, if it would eat into your emergency fund, it’s probably not the best idea. Most experts recommend having at least three to six months of expenses in the bank, so if your green projects would deplete that store, you’ll want to look for other options.
Are you planning to make some eco-friendly home improvements in the coming year? Here are just a few of the ways you could pay for them:
A home equity loan
These are loans that allow you to tap the equity in your home (the stake you actually own) and turn it into cash. You can use this cash to make improvements to your home or cover any other costs you might be facing — medical bills, college tuition, etc.
This is similar to a home equity loan, except it works more like a credit card. Instead of getting a lump sum based on your equity, you get a line of credit to draw from. You can use as little or as much as you need over a certain period of time.
A cash-out refinance
You can also opt for a cash-out refinance. This essentially replaces your existing mortgage loan with a new one — this time with a higher balance than what you currently owe. Then, you get the difference between the two loans in cash, which you can use on your green home improvements or any other expense you’re facing.
An Energy Efficient Mortgage
These are FHA loans designed specifically for consumers looking to improve their home’s energy efficiency. They can be used to buy a home that needs energy updates or to refinance an existing home.
Personal loans can also be an option for covering home improvements. While these can be easier to come by than some other options (there’s less paperwork, at least), they usually come with higher interest rates, too — and that means costlier renovations in the long run.
Finally, credit cards are an option, too. Interest rates on these are usually highest of all, so if you go this route, minimize your spending and make sure to pay off your balance as quickly as possible. You might also consider opening a new card with a zero-interest promotional period to take advantage of.
Need help financing your home projects?
Generally, home equity loans and cash-out refinances will be your most affordable options for financing home improvements. Want to talk about the best choice for your specific situation? Get in touch with Premier Nationwide Lending today.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.