How to Finance Your Dallas Home Renovation Project

In recent years, more Dallas homeowners are choosing to stay put and invest in renovating their homes rather than moving. Financing a home renovation project can bring new life and style to your living space, reflecting your personality and needs. A renovation can improve your quality of life and increase your home's value, making it a wise financial decision for the future.

Whether you dream of a modern kitchen makeover or a luxurious bathroom upgrade, understanding your financing options is crucial to making those dreams a reality. Today, we’ll explore how you can finance your home renovation project, ensuring you have the information you need to choose the best option for your situation.

Borrowing Against Your Home's Equity

Depending on how long you have been making payments on your Dallas, TX home, it is possible that you already have some equity built up in it. This is money you can tap to perform the home renovation project that has been bouncing around in your mind recently. Here are some options for that:

Home Equity Line of Credit (HELOC)

You might have heard about a HELOC (pronounced like "he lock") loan. But, what is it?

The Consumer Financial Protection Bureau explains: "A home equity line of credit (HELOC) is an "open-end" line of credit that allows you to borrow repeatedly against your home equity."

In other words, once you have built up some equity in your home, you can borrow against that equity to receive the funds you need right now to complete your home renovation project (or for anything else you need the money for).

Pros:

• Flexible borrowing and repayment options.
• Only pay interest on the amount you use.

Cons:

• Variable interest rates can increase.
• Risk of foreclosure if you default.

Home Equity Loan

This might seem like the same thing as a HELOC, but there is a key difference. Instead of serving as a revolving line of credit against the equity in your home, a home equity loan is simply a lump sum loan you can receive to use how you see fit. Take the money right now and put it towards the project that you want to accomplish and get it all done at once.

Pros:

• Fixed interest rates.
• Lump sum allows for large projects.

Cons:

• Higher monthly payments compared to HELOC.
• Risk of foreclosure if you default.

Cash-Out Refinancing

Another loan option in the toolbox for you to receive financing for your Dallas, TX home renovation project is to look at a cash-out refinance option. This makes it possible for you to take out a mortgage at a higher total cost than what you owe on your home now. You then take the difference between those two figures and use those funds for the home improvement project that you are working on. Essentially, you are expanding the cost and length of your mortgage, but you are doing so to afford a home renovation project that can potentially add as much, if not more, value back into your home.

Pros:

• Potentially lower interest rates than HELOC or personal loans.
• Can be used for any purpose.

Cons:

• Extends the length of your mortgage.
• Closing costs and fees.
• Your current mortgage interest rate is likely much lower than what's available with today's mortgage rates (2024).

Non-Equity Financing Options

Good news for those who don't necessarily have a ton of equity built up in their homes just yet. They can still take on their home renovation project via other means. Consider the following options for financing a home renovation project even if you don't have a lot of equity built up in your home at the moment.

Cash

Some people have set aside enough savings to pay for their home renovation projects out of pocket. This is the ideal way to go if it doesn't completely deplete your cash reserves. It will save you from having to pay back interest on a loan and free you up to do the home renovation projects that are within your budget.

Pros:

• No interest or loan fees.
• No risk of debt.

Cons:

• Limits the scale of the project.
• Depletes cash reserves.

Personal Loans

Depending on your past spending habits and your credit score, it might be possible to borrow a personal loan that you can use towards your next home renovation project. There are a few things to consider about borrowing a personal loan before you sign on the dotted line:

Interest Rates: Check the interest rates available via different loan providers. You should certainly shop around until you find a rate that is suitable for you. Getting the best rates on the market depends on having a strong credit score. Make sure you take this into account as well and look at ways to improve your score if it is not where you need it to be at this time.

Length of the Loan: The full term of the loan is another thing to consider when evaluating your borrowing options. You don't want to get tied into a loan that is anticipated to last far longer than you want to pay on it.

Type of Lender: You might find better deals with certain lenders, such as credit unions, than others. Do your research before agreeing to any particular type of loan.

Pros:

• Quick approval process.
• Can be used for any purpose.

Cons:

• Higher interest rates compared to HELOC or home equity loans.
• Shorter repayment terms.

These are all things to put at the front of your mind when looking at your financing options. You can and should be able to find a lender that can provide you with everything that you require from your personal loan, but that is only going to be the case if you do your homework ahead of time.

How Much Do Home Renovations Cost in Dallas?

Now that you know about some of the best ways to finance your renovation make sure you consider the typical costs associated with these projects. These costs may vary based on the specifics of the projects that you are considering. Additionally, the costs in the Dallas, TX area are going to differ from those in other parts of the country.

• Major Kitchen Remodel (midrange) - $76,494
• Major Kitchen Remodel (upscale) - $150,500
• Bathroom Remodel (midrange) - $23,219
• Bathroom Remodel (upscale) - $73,800
• Universal Design Bathroom Remodel - $38,145
• Primary Suite Addition (midrange) - $155,298
• Primary Suite Addition (upscale) - $312,650

These are just averages, and they don't necessarily reflect the final cost that you may pay for your project. Use these as a barometer for where to start when you begin planning your remodeling project or home addition.

Source: 2024 Cost vs. Value Report

Financing a home renovation project in Dallas, TX can be achieved through various methods, whether you have significant equity in your home or not. By carefully considering the options available and understanding the pros and cons of each, you can make an informed decision that suits your financial situation. 

When you are ready to renovate your home, schedule a consultation with Transom Remodeling. Our remodeling service reaches the North Dallas areas, including University Park and Allen, as well as all the communities in between. We invite you to experience the unparalleled service and expertise that sets us apart in the Dallas remodeling scene.

Disclaimer: The information in this article is for informational purposes only and should not be considered financial advice. Always consult with a financial advisor or mortgage specialist to ensure you choose the best financing option for your needs.