How to Finance Your New Dream Kitchen

Wondering how to finance your kitchen remodel project? There’s no secret that kitchen remodeling is expensive. If you want your dream kitchen with custom kitchen cabinets but don’t know how you’re doing to afford it, don’t worry. There are plenty of kitchen renovation financing options out there. At RM Kitchens, our team has walked couples and families through thousands of custom kitchen renovations. Regardless of how extensive your kitchen renovation is, here are our tried and true tips on how to finance your kitchen remodel project. 

How to Finance your Kitchen Remodel

What Are Your Kitchen Remodel Financing Options?

Federal Programs

Government loans are one kitchen remodel financing option and can help you take out a new mortgage or refinance your current mortgage. While there can be a limit on what the funds are used for, most cover bath and kitchen remodeling or home improvement project. The Federal Housing Administration (FHA) operates two programs to finance your kitchen remodel:

Title I Property Improvement Loans can be used for home improvements and repairs. However, if the renovation costs more than $7,500, the loan must be secured by a deed of trust or mortgage.

Energy-Efficient Mortgage (EEM) Program will contribute to kitchen renovations that make your home more energy-efficient or lower your utility bills.

Home Equity Loans

Know the cost of your kitchen project and want the money in a lump sum? A home equity loan is a good idea if you know the kitchen remodel project will increase home value. While it is often cheaper than a personal loan, a home equity loan can have rates higher than a conventional mortgage and can take a month or more to fund. However, a home equity loan boasts low closing costs, longer repayment terms, and tax benefits over conventional mortgages.

Home Equity Line of Credit (HELOC)

Know the cost of your kitchen project and want the money in a lump sum? A home equity loan is a good idea if you know the kitchen remodel project will increase home value. While it is often cheaper than a personal loan, a home equity loan can have rates higher than a conventional mortgage and can take a month or more to fund. However, a home equity loan boasts low closing costs, longer repayment terms, and tax benefits over conventional mortgages.

Personal Loans

Taking out a personal loan makes sense if you don’t have much equity in your home or need the funds quickly. Personal loans require no collateral, and you get the money fast. Personal loan rates are lower than credit cards yet higher than home equity options, so be sure to research the loan terms for repayment periods. Although, a personal loan is harder to qualify for based on your credit history and offers no tax benefits.

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Credit Cards

Credit cards make sense if you have minor kitchen remodel updates, like painting, adding a new backsplash, or replacing the hardware on your cabinets and drawers. Most credit card promotional periods last up to 18 months, so you don’t have interest on monthly payments. Check your credit card’s interest rate, and monthly payment minimums first to be sure it makes sense if you have good to excellent credit. 

How Much Should You Plan to Borrow?

Whether you’re doing the kitchen remodel work yourself or hiring an experienced contractor, the first thing you need is an accurate estimate. Lenders all want a fixed dollar amount before you can even sit down and discuss your options. The price of your kitchen renovation can vary significantly based on your designs. 

Get a firm estimate from a contractor, one that breaks down labor and materials. If you’re doing the work yourself, research and compile a detailed materials list, including quantities, costs, and cumulative total. Remember to include permit fees as well as equipment rental or purchases. 

To avoid surprises, always add a cushion to your estimates. Add 10% for any contract work. Add a 20-30% buffer for DIY or minor work you do yourself to be safe.

Building Your Dream Kitchen

Regardless of which kitchen remodel financing option you choose, a custom kitchen renovation is a lifetime investment, both in your well-being and the value of your home. Determine how much you can afford, create a budget, and put together a complete financial plan. If you need help or have more questions, we’re happy to assist. Meet with us today to discuss financing and building your dream kitchen.