Real Estate Experts: 4 Smart Ways To Fund Renovations When You’re Nearing Retirement
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Josephine Nesbit
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Jenna Klaverweiden
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Aging in place doesn’t just mean staying in your forever home. It also means making necessary renovations to make life comfortable. But how do you pay for them if you’re still building your nest egg for retirement?
Luckily, homeowners nearing retirement have several options for funding renovations without dipping into their savings. Here are some options to consider, according to real estate experts.
Also see 11 money questions you must ask before renovating your home.
Home Equity
One of the biggest benefits of homeownership is equity. Home equity is the difference between a home’s current market value and the amount still owed on the mortgage. Homeowners have several options to tap into their equity and borrow against their homes.
“If you don’t want to dip deep into your savings to fund the renovations upfront, loans can help you stretch the payments out in a more realistic manner,” said Seamus Nally, CEO of TurboTenant and a landlord of several residential properties in upstate New York and Colorado.
A home equity line of credit, or HELOC, is one example. “These allow you to be a bit more particular with how much money you withdraw from your home equity so that you can more strategically fund specific projects, as compared to more traditional loans that require you to borrow a lump sum upfront,” he said. “HELOCs also usually have lower interest rates too.”
There are also home equity loans, which allow you to borrow a lump sum of money against your home’s equity, and cash-out refinances, which entail taking out a larger mortgage on your home and keeping the difference in cash.
One thing to keep in mind is that these options use the home as collateral, and homeowners will typically need at least 20% equity in their home to take advantage of this option.
Grants
Depending on the location and the homeowner’s circumstances, grants could help fund renovations.
“It never hurts to look and see if you are eligible for any financial assistance,” Nally said. “You may have luck on the state level or even the federal level with finding government-backed grants. There are sometimes also local programs that offer grants.”
For example, the Older Adult Home Modification Program is a Department of Housing and Urban Development program that provides grants to low-income seniors. The funds allow eligible seniors to make home modifications that improve safety and accessibility.
Get a Side Hustle
For those who have the extra time, a side hustle can help homeowners save up extra money to pay for renovations.
“Side hustles are all the rage these days,” said Désirée Ávila, a Realtor in South Florida. “You can drive for Uber, shop for Instacart, house sit, pet sit, dog walk, or use your talent and skills to freelance and make some extra money.”
Rent Out Space
Homeowners can utilize any extra space in their homes to make extra cash to fund renovations.
“Try renting out parking or storage space in your home to make some extra cash,” said Ryan Barone, co-founder and CEO of property management software company RentRedi. “Extra space in driveways, garages, basements, attics and storage sheds can generate extra income that can be used to save up for the repair or renovation.”
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