Paying for home renovations after you retire isn’t always easy. After all, chances are, you’re living on a fixed income. For certain, you’re not bringing home a paycheck anymore, so it makes sense that you find the right solution for financing your new construction project.
One method that would work for you is a reverse mortgage. If you’re 62 years of age or older, have owned your own home for decades, and been paying religiously on the monthly mortgage, you can potentially qualify for hundreds of thousands of dollars. You can take your proceeds in one lump sum payment, or you can take equal monthly disbursements. What’s more, you need never pay the loan back until you move or you die.
But what are some of the other creative ways to help pay for home renovations after retirement? According to a recent article by The Dedicated House, around 76 percent of people aged 50 and older will choose to stay in their family residence as they age or so states AARP.
Naturally, there are considerable benefits to residing in your family home. For lots of aging and retired persons, it represents comfort, independence, extra privacy, and a very strong feeling of safety. Your home is your castle, after all.
While your home is always going to require maintenance, by engaging in home renovations, you can increase the property’s value. This can occur when you add a new bathroom or a new kitchen, or you decide to conduct energy saving measures such as solar panel replacement, double glazing on the windows, or invest in a new boiler system.
In these times of high inflation, renovation costs can be high depending upon whether you wish to renovate the entire home or only a certain portion of it. But when you crunch the numbers, you’ll find that once retirement kicks in, aging at home can be far more inexpensive than joining an assisted living community.
But if you’re planning on renovating your home, you need to plan ahead. For example, maybe you want to use professional contractors, or you feel confident enough to do it yourself (DIY). In any case, there are going to be fees associated with the renovations.
Here’s how to pay for home renovations after you retire.
A Home Equity Lines of Credit (HELOC)
Says the Dedicated House, a HELOC is a well-known method for paying for home renovations due to its being a secured loan which is seconded by your family home. If you compare it to a personal loan, you might be entitled to a lower interest rate. It also can be taken as a line of credit which means you can take whatever money you want when it’s necessary.
A HELOC is said to be a good option for ongoing or prolonged renovations. It also grants you access to your funds fairly rapidly. Keep in mind, since you’re using your home as collateral, if you fail to pay your loan payments on time, your property can be foreclosed on. Most HELOCS are assigned variable interest rates which can result in your payments going up. You also need proof of a generous amount of home equity to get a HELOC.
A Government Loan
If you qualify for a government loan, you can save on the costs of interest and insurance. One example of a government loan is said to be a HUD Title 1 Property Loan. It’s decent option if you recently purchased a home and are looking forward to doing some renovations or improvements on it.
The proceeds must be dedicated toward renovations that enhance the home’s livability. Not all upgrades will qualify for the loan. The loan is insured by the Federal government which means you can potentially get a lower rate than you would with a personal loan.
A Home Equity Loan
Said to be similar to a HELOC, the main difference is that you can get a home equity loan at a given percentage rather than just acquiring a line of credit that has an adjustable interest rate. Also, you have the option of paying all the interest on the entire amount of the loan prior to paying it back.
But if you borrow additional funds, you can also pay the loan back sooner. Again, the loan comes with a fixed interest rate which might be more suitable for some borrowers than the HELOC’s modifiable rate. The rate might be higher than a HELOC, but tax deductions will provide you with a significant savings in the long-run.
Entering into home renovations after retirement can be an exciting project for empty nesters. But they don’t come cheap. Luckily there are options out there for you to finance your new dream kitchen or bathroom.