One issue central to redoing your floor is that pesky problem of how to pay for it. Typically, new flooring, whether it be carpeting, ceramic or wood, is just one component of a more extensive
interior design scheme. While some family budgets can withstand the cost of the flooring alone, the addition of new cabinets, walls, furniture, etc.
tends to go beyond the average “rainy day” bank account.
So, the question becomes, how do I afford these home improvements? How do I add value to my home, and still make the mortgage payment? There are really
three main options for financing your new flooring:
- Credit Card
- Retailer Financing
- Home Equity Credit Line
With most basic flooring projects, it’s often best to just say “charge it.” In fact with most major credit cards now offering competitive rates and flexible payment options, pulling out the plastic can be the easiest and most efficient means of getting that perfect floor of
In addition, credit cards offer many perks in addition to ease of payment. You can accumulate frequent flyer miles with your favorite airline on many cards, and most cards offer consumer protection options on purchases.
Another popular method to finance your flooring improvement is through a retailer financed plan. Typically, retailers will offer financing with as little as 10% down after filling out a credit application. Repayment terms vary from six months to usually no longer than five years.
And it pays to shop around. Different stores offer great deals at different times of the year. It is not uncommon to find 0% financing, or no payments for one year or more through major retailers. Not a bad deal to finally have that dream flooring!
Home Equity Credit Line
One of the best – and incidentally most tax efficient – ways to finance home improvement and flooring projects is through a home equity credit line. This option would be advisable on large projects that call for the redesign of more than just one floor, or installation of carpet.
A homeowner accumulates equity in their home in three ways. First, the amount of your down payment is “instant” home equity. Subsequent mortgage payments gradually build up home equity as the outstanding loan balance is paid off. Finally, home equity increases as the market value of your home increases. For example, a home purchased 10 years ago for $150,000 might be worth $225,000 today. Even without the cumulative effect of
mortgage payments, you would have an extra $75,000 in value to tap into for home improvements.
And even better, home equity loans are among the easiest to obtain. Ask at your local bank. Indeed, if you check around, almost any bank or savings and loan is currently offering great deals on home equity loans – with minimal – if any – closing costs. And, because these loans are considered short term (even though they typically extend for 10 years), they often carry interest rates less than prevailing mortgage rates. Finally,
they offer the option of paying only interest each month, not principal plus interest as is common with a conventional mortgage.
Once the loan is set up, you “draw” from it by simply writing a check from the loan account into your checking account, and paying your flooring and home improvement bills from there. Even though you may have a home equity loan of $75,000, you only borrow what you need. You are not required to borrow the whole amount at once. Also, you can pay back the principal at any time, and borrow more as needed at any time. And best of all,
because this loan is secured by your home, all the interest is tax deductible.
So there it is. A low interest loan with flexible borrowing and repayment options, and fully deductible interest. Now that’s the way to improve your home!
These are three great options for financing home improvements. Before making your purchase, it is best to analyze which is best for you based on your individual situation and needs.
Ready to shop for you new flooring? Contact Flooring America to learn more today!