Kitchen Remodel Financing

Pros and cons of kitchen remodel financing

Remodeling a kitchen is a scary but exciting prospect. Since the expense can be quite large, averaging over $25,000, homeowners should carefully consider the positives and negatives of kitchen remodel financing.

PROS

• Increase the value of your home - Perhaps one of the quickest and simplest methods of increasing your home value, a kitchen remodel can bring new life to an older home in just a few weeks.
• No Lump Sum Payment - With financing, you get the remodel that you desire without needing to pay for the whole thing upfront. Make monthly payments instead of dropping $25k at once.
• Many Options - There are plenty of options when it comes to how to finance your remodel. From personal loans and credit cards to HELOCs and cash-out refi, you have a lot of choices for how to finance.

CONS

• Expensive - 0f course the most obvious downside is the high cost of the remodel. The average cost is over $25k, which many homeowners cannot afford.
• Potentially High Interest - Depending on what method you choose for financing, you may end up spending a significantly larger amount than you originally budgeted due to interest.
• Potential Loss of Your Home - If you have your home as collateral for your new loan, you may lose it if you are unable to make the monthly payments.

Will upgrading my kitchen increase my home value?

The short answer is yes. The longer answer is still yes, but it will vary widely depending on what type of remodeling you are doing, how well it’s done, and where you live.

Nationally, for a major and upscale kitchen remodel, the return on investment is roughly 54%. This means that if you spend $100,000, you can expect to recoup about $54,000.

For smaller remodels, this number jumps to 81%, meaning you will have a higher return on investment.

Types of kitchen remodels

Not every kitchen requires a huge remodel. While some people want to replace every single aspect of their kitchen, even sometimes tearing down walls, others choose to go with a much simpler remodel.

Small Remodel

A small remodel is often the most cost-effective method of increasing the value of your home. You won't be needing all new appliances and the layout of the kitchen remains the same, but it will be refreshed!

An example of a smaller remodel would include:

• Painting your cabinets
• Adding a backsplash
• Paint the walls
• New light fixtures
• New faucets

Mid-Level Remodel

If you want to go one step further than a small remodel, but not all the way to the major, upscale remodel, a mid-level remodel would work great. This could include:

• Replacing appliances with new ones
• Replace countertops
• New cabinets
• New flooring
• New fixtures

Major Remodel

If money is no object and you want to entirely rejuvenate your space, it’s time for a major remodel. These can often include:

• Changing the layout of the kitchen and the location of appliances
• Adding or removing windows and doors
• Removing a wall to open up the space
• High-end countertops
• High-end appliances

How much does a kitchen remodel cost?

Depending on what you want to have done to your kitchen, the cost varies greatly. Many people choose to do simple remodels whereas others want to change everything about their kitchen. Here are the average costs for the most popular projects.

• Kitchen Cabinets - $3,000 - $8,000
• Appliances - Anywhere from $200 - $10,000
• Countertops - $2,000 - $4,500
• Flooring - $1,400 - $5,000
• Faucets - $120 - $300
• Sink - $250 - $650
• Backsplash - $10 - $25 per square foot
• Painting - $800 -$1,500

As you can see, the prices range widely and will depend on the quality of materials and the installation costs associated with them.

Tips for budgeting for your kitchen remodel project

Budgeting for a large expense is incredibly important, and even though you are financing the purchase, you should only spend what you can afford to pay off.

1. Decide what amount you can afford and do not go over the budget.
2. Add extra to deal with unexpected costs and problems
3. Choose your priorities for renovation
4. Don’t forget the additional cost of eating out!
5. Do smaller tasks, such as painting, yourself
6. Don’t add extra items during the renovation

What credit score do I need for a kitchen remodel loan?

Depending on what type of financing you decide to go after, the required credit scores can differ.

No matter which method you choose, it’s likely that a bad credit score will prevent you from being able to receive financing.

The only exception would be if you choose to go down the route of a credit card, and you already have the credit card.

For a personal loan, most lenders want borrowers to have above a 690 FICO score, but some will accept people below that threshold.

For either of the home equity financing, you will likely need a score in the mid 600’s. Some exceptions may be made for borrowers below that, but they will have less favorable terms.

What is the best way to finance a kitchen remodel?

While there is no set-in-stone “best” way to finance a kitchen remodel, the most common and recommended methods are a personal loan and HELOC.

Both of these methods are great for people in a good financial situation, as you will get favorable terms and low-interest rates. This will save you money in the long run, and you will continue to build your credit as long as payments are made.

Credit cards are not recommended, because the interest rates are usually very high and it could result in you not being able to make your monthly payments.

Is financing a kitchen remodel a good idea?

A kitchen remodel could be a great idea. It could also be a bad idea if you are not good with your finances.

A kitchen remodel is a good idea if:

• You have the budget to pay off your financing
• You intend to increase your home value and sell
• You have a good credit score
• You receive a low-interest rate
• You will make every monthly payment

Consider your loan options

While there are many options for financing a kitchen remodel, a personal loan is often the fastest and easiest option. Here are the current rates for some of the best kitchen remodel personal loans from lenders.