Remodel on $100 extra a month

Iris Price | Improvement Center Columnist | July 14, 2015

How would you improve your home if you had an extra $100 a month to spend?

Scour flea markets and decorate with your repurposed finds?

Pay to put your garage clutter in an offsite storage unit?

Maybe you really want an eat-in kitchen, but the cost of a complete kitchen remodel can run into many tens of thousands of dollars. Even a minor kitchen remodel can lighten your wallet by almost $20,000. What about putting off the kitchen remodel a decade or two and building an outdoor kitchen instead? That can get pricey, too.

And what if you really need a complete roof replacement to repair the leaks? It's a crucial update, and that $100 begins to look paltry enough to deter you altogether from your mission to upgrade.

Before you give up and spend the money for a night on the town, take a look at financing options for home improvements.

How to finance your home improvements

Investing in desirable remodeling projects can help you build equity in your home, allowing you to continue making improvements you and your family can enjoy for years to come. It could make it possible for you to sell and upgrade to another home in the next few years. And if you're looking to downsize, it could help fund your retirement dreams. So what can you do with $100 a month burning a hole in your pocket?

  • Save up for a new front door. In your grandparents' day, saving the money until you had enough might have been the only good advice, but putting aside $100 in a savings account or investing it might take you years at today's interest rates to save for a major home upgrade. However, if you use this strategy, you can probably afford to buy a new steel or fiberglass entryway door in a year. According to surveys of what homebuyers wanted most in 2015, a spiffy, colorful front door made the cut. New entry doors actually provide some of the best return on investment you can get, according to the Remodeling 2015 Cost vs. Value Report.
  • Apply for a rehab mortgage and get that eat-in kitchen. If you plan to buy or refinance a home and want to make at least $5,000 in upgrades, look into applying for a 203(k) rehab mortgage through an FHA-approved lender. This type of mortgage allows you to borrow toward the cost of the home plus what you need for the rehab. Depending on how much you are approved to borrow towards rehab, you might afford a complete kitchen modernization, room addition, or roof replacement - this type of financing can really help cover some of the biggest home improvements you need, with the exception of luxuries like an in-ground pool.
  • Get a streamlined 203(k) and build your outdoor kitchen. Similar to the 203(k) rehab, this mortgage is designed for smaller repairs and improvements costing up to $35,000. Improve your plumbing, build your backyard retreat, install skylights, or get larger replacement windows in your home to add more natural light.
  • Make your home energy-efficient with a Title 1 property improvement loan. If you own a single-family home, have a good credit history, and the ability to pay back the loan, you may be able to borrow up to $25,000 with a maximum term of 20 years for your home improvements. Each lender may offer a different interest rate, but it's fixed rather than variable and based on local rates. Upgrade the energy-efficiency of your home with a new HVAC system and programmable thermostats controlled from your smart phone or finance a geothermal heat pump.
  • Indulge your home improvement fantasies with a home equity loan or HELOC. If you already have equity in your home, you may be able to borrow against it with your home as collateral. With a home equity loan, the amount you borrow and the interest rate are fixed. It's also tax deductible if you use it for home improvements. A home equity line of credit (HELOC) does not limit you as to how you spend the available credit. Depending on how much you qualify for, you can use up to your credit limit and buy new furnishings, install an outdoor kitchen and in-ground pool, or even take a trip around the world to see how the other half lives for remodeling inspiration. You draw money out as needed over time, but interest rates can fluctuate, making payback painful. If you default on either the equity loan or HELOC, you risk losing your home.

Other financing strategies include credit card financing and no-interest credit deals for a fixed amount of time such as six months or a year or more. Credit cards usually have a significantly higher interest rate than the financing options for home improvements described above, and no-interest credit for a fixed period of time could end up costing you interest if not paid back in full on time. But if you know you have a windfall coming and can make minimum payments in up to $100 increments until then, these are two strategies that could make some of your less ambitious home upgrades a reality sooner rather than later.

Photo credit to Nam Phan

About the Author

Iris Price is a single Baby Boomer whose antidote to a lack of retirement funds was to launch a long-delayed career as a writer. While others her age concoct bucket lists and travel the world, she bought a new-construction home and obsessively creates lists of must-have home improvements and personal realization goals. She specializes in writing about home services and self-motivation.