Which financing option is right for my kitchen remodel?

Kitchen Installation Cabinet Refacing Kitchen Design and Style

Kitchens, whether we want to admit it or not, can be pricey. Many people don’t have $15-$50K laying around, so what do you do? How do you plan for it so you will be able to comfortably pay for it? Also, is there an opportunity for a return on your investment when renovating your kitchen?

A kitchen adds value to your home

When considering whether you should finance your kitchen remodel, think of it as compared to buying a new car. As soon as you drive a new car off the lot, its value drops significantly, but a new kitchen actually adds value to a home as the kitchen is consistently the room home buyers are most interested in and look at first. While this changes from year to year, Remodeling Magazine’s 2022 Cost vs Value Report estimate for costs recouped for minor kitchen remodels was 71.2%.

At Kitchen Magic, we get a lot of pressing questions about the best way to finance a remodel, and we understand how important they are. So, what options do you have? There are plenty of ways to finance your kitchen remodel without breaking the bank, and we’ve done the research so you don’t have to!

The first step in the financing process is determining the amount you are comfortable spending on your kitchen renovation. The answer to this will guide the entire rest of your financing journey. There are different options that fit any and every budget, so keep in mind, it is not one size fits all. But the good news is that you have plenty of options!

Financing through Kitchen Magic

Kitchen Magic offers a variety of financing options from multiple financing partners to make your project affordable with quick and simple application processes. Complete an application online or by phone. Many applications are approved in less than a minute. Some applications may take longer with additional information requirements.  Financing options include fixed-rate loans and deferred interest promotions. 

Ultimately the choice is yours. Paying for your brand-new kitchen should align with what you are comfortable with. If you choose to finance your remodel in a different way, options are always good to have, and finding the program that best suits your needs is not as difficult as you might imagine.  

The number one thing to keep in mind is to stay grounded, do your research, and become well-educated about your options. Find additional information on our financing options here. 

What are my other options?

So, how are you paying for those beautiful Frosted White Shaker Cabinets and gorgeous new quartz countertops? If you wish to investigate other finance options other than those Kitchen Magic offers, do not fret! There are plenty of choices, such as:

  • Cash-out refinance
  • Home equity loans
  • Home Equity Line of Credit (HELOC)
  • Personal loans
  • Credit Cards

Cash-out Refinance

A cash-out refinance is an excellent choice for those who have equity built up in their home. To put it simply, equity is the difference between what you owe for your home and your home’s value.

In a cash-out refinance, you refinance your mortgage for more than what you owe for it. The more equity you have built up, the better. Say you purchased your home for $200,000, and it is now worth $275,000. If your current mortgage balance is $190,000, you have $85,000 in equity. If you refinance your loan for $275,000 you may have the ability to pull $85,000 cash out of your home’s equity to put toward your kitchen project. The more equity you have, the more likely it is that you will be able to access enough money for your kitchen remodel.

This option may take time for all of the necessary paperwork to be completed. Be sure to ask your potential lender for all options, restrictions, timelines, and specific details.

Home equity loans

Be aware, this is different than a cash-out refinance. This is a separate loan payment taken out against the equity of your home and unrelated to the conditions and payment of your original home loan. A Home Equity Loan has its own set of conditions and its own payment.

With this option, you receive a lump sum of money once the loan closes. Think of this as a second mortgage. This means you may end up paying fees and closing costs all over again, just like you did when you bought your home. This option may also allow you to borrow a higher percentage of equity than a cash-out refinance. It is a great option, like a cash-out refinance, for someone who has a good amount of equity in their home.

Home equity line of credit (HELOC)

A HELOC is another great option, but like all the others, it has its pros and cons. This option uses your home as collateral. If your financial situation changes quickly, it might affect the terms of the HELOC.

A HELOC typically best fits someone looking to renovate multiple spaces in their home, rather than just one room. As mentioned for a home equity loan, you may end up paying fees and closing costs with this option as well. You will need to decide if the additional costs associated with this option will work for your budget and plan.

The upside of a HELOC is that they tend to carry lower interest rates and you will not need to begin making any payment until you spend some or all of the line of credit. The flexibility in borrowing and repaying them is part of what makes a HELOC such a popular option.

Investing in your home is always a smart idea that will put you on a path toward a return on the investments in your home (contingent of course on your home value remaining strong). As always, your banker or lender will provide options, requirements, loan interest rates, and payment details.

Personal loan

This is essentially an installment loan option, and it is a great option for many people looking to finance their remodel. This type of loan has a fixed interest rate and is an unsecured installment loan. It typically ranges from 36-60 months (about 5 years) to repay these loans. One of the pros is that the fixed payment remains the same monthly, like a car payment, making it easy to plan for in the monthly budget.

The most important thing to keep in mind is that you should have a good idea of what your credit score is when considering this type of loan. A strong score will keep your rates and payments low and will allow you to finance a larger amount to put toward your remodel. Before taking this route, work to get that credit score up higher if it is not already! Speak with your bank or loan provider for information on how you might be able to do that. If needed, you can also inquire about whether credit repair is a viable choice for you.

Credit cards

We strongly recommend you only use this option if you are certain that you can pay off the balance in a timely manner. Many people choose to pay with credit cards to earn rewards through the card. They have the money in their bank account, and they pay the statement balance before incurring any interest charges or finance fees. Others choose this path when they have an introductory offer of a low-interest rate for a promotional period. If you choose this option and don’t pay off your balance before the no-interest or low-interest period expires, you could wind up paying far more for your kitchen than you ever intended.

This is not a conventional route for a lot of people, but it is a simple and accessible way to pay for your renovation without the time and costs of securing a separate loan. The key to this option is your credit limit, your interest rate for the card, and whether you are willing to cover what the credit card might not. Many people may not have a credit limit over $15,000, so a credit card may not cover the entire renovation (unless you are using multiple credit cards). Overall, this is not the ideal option, but it is available to those whose needs it best fits.

Wrapping it up

Full transparency: we are kitchen remodeling experts, not financing professionals. But our hope is that by now you have a better understanding of your options when it comes to financing your kitchen remodel. We know it can feel overwhelming trying to figure out which financing route is best for you and your home project(s). But what you absolutely must remember is that you deserve to have a kitchen you feel excited about, whether you love to cook... or maybe you just use it for its beauty as you eat your takeout... but hey, that’s for you to decide!

Just keep this in mind: if you are a well-educated, informed consumer, financing your kitchen will be a breeze. And Kitchen Magic can help; just call us at 866.525.0012 for a free Design Consult with one of our specialists and set off on your path toward a beautiful, magical new kitchen!

Dream up your new kitchen with us!

Set Appointment
New call-to-action