How to Borrow Money for Home Projects

Get the funds you need to complete home projects through financing.
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When you have home improvement projects you and your partner are ready to tackle, funding your work can be a challenge. Although it is possible to borrow money for home projects to give you the cash you need to work, examine your options carefully so you choose the solution that fits your needs and your financial circumstances. Don’t overextend yourself, particularly if your chosen financing is tied directly to your home loan. If you can't make your payments, you could lose your home.

Step 1

Calculate the cost of the home projects to determine a budget. If you plan to have a contractor do the work, get three estimates from local companies. If you plan to do the work yourself, calculate the cost of the tools and materials necessary to complete the projects.

Step 2

Decide the type of financing to use for your projects. You could use a credit card or apply for a standard loan, home equity or personal line of credit, or a second mortgage or mortgage refinancing. Although using a credit card is simple, the high interest rate makes it a poor choice unless you an pay off the balance quickly. A personal loan carries a lower interest rate over a specific period. A personal or home equity line of credit provides a balance of credit that you can use as you need it; the home equity line of credit depends on the amount of equity you have in your home. Mortgage refinancing or second mortgages are effective ways to fund large renovations because you can borrow as much as 80 percent of the appraised value of your home.

Step 3

Approach several financial institutions if you decide to pursue a personal loan or a line of credit. Learn the terms of the personal loan or line of credit, including interest rate and payment schedule. Request the documents necessary to apply for the financing. If you decide to pursue mortgage refinancing or a second mortgage, approach your current lender first to see if you can receive special terms due to your current mortgage. Check refinancing options with two or three other lenders to compare terms before choosing a loan.

Step 4

Complete the paperwork to apply for the loan of your choice. Submit the application and all supporting documentation to the lender to apply for the loan. The lender may require you to have your home appraised to determine the current value of your home before approving a loan.

Step 5

Receive the funds from the financing. Personal loans and mortgage refinancing provide you with a lump sum, while funds from a line of credit transfer into a bank account as you need them.

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