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Flooring financing

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How much would you like to borrow for upgrading your flooring?

by | Jul 13, 2021

Flooring financing

Why install new flooring?

Whether you are thinking of putting your home on the market or would like to make a few changes to match your style, new flooring can add a lot of character to your home. For example, maybe you want to brighten the home and would like a lighter colored floor. There are many reasons to install new flooring in your home along with many options in doing so. Home improvement projects can seem daunting, especially if payment is something you need to worry about. Having financing options can help take away some of that worry.

New flooring can increase the resale value of the home and may be beneficial if you are looking to sell your home and would like to increase the value before putting it on the market. New flooring may also benefit a new family with different needs such as allergies or durability.

Flooring spans throughout the entirety of the house and therefore is considered to be one of the most important parts of the house. However, because flooring is so expansive, it can also be one of the most expensive parts of a home.

What is flooring financing?

Financing your flooring project is a way to pay off your home’s new flooring over several months, rather than one upfront lump sum. The financing options differ in APR percentages and term lengths based on the lender you choose to borrow from.

How much does new flooring cost?

Price of flooring fluctuates depending on the type of floor that fits your needs. If you dream of cherry or oak, you are going to look at a more expensive project. If you are looking for something that still looks nice but is more cost efficient, laminate may be your best option. HomeAdvisor also highlights that what you pay varies greatly by location and the required materials. The average price to install 500 square feet of new flooring is $2,952.

 

Type of Flooring

Average Material + Installation Cost Per Square Foot

Hardwood

$6 – $22

Ceramic or Porcelain Tile

$7 – $20

Natural Stone Tile

$6 – $20

Carpeting

$4 – $11

Laminate

$3 – 10

Vinyl or Linoleum

$3 – $7

 

It is important to keep in mind that labor costs may run higher if replacing one type of flooring with another. However, this should not deter you from getting flooring that suits your needs or taste. Keep reading for the best options for flooring financing.

 

Options for Financing New Flooring

  1. Personal Loan

A personal loan can be a good option when you are not liquid enough to pay for a project in cash or do not yet have enough equity in your home to leverage for new flooring. A personal loan is a type of installment loan. This type of loan is typically paid back in 12-84 months so it can offer a lot of flexibility. A personal loan can be a good option for someone with good credit or a good relationship with their bank or credit union. This type of loan does not require that you put anything up as collateral so you do not need to worry about lien on your home as long as you make your payments. Interest rates for personal loans can be lower than those for credit cards or other types of loans. Interest rates for personal loans can range from 5 to 32 percent depending on credit and loan length, while credit card interest typically averages 18 percent. Generally, the better credit you have the lower the interest rate will be. One thing to keep in mind with personal loans is that the better your credit, the lower your interest rates will be.

Prepayment penalties: Some lenders don’t charge prepayment penalties, meaning you can pay off your loan early and decrease the amount you pay in interest.

 

2. Home Equity Loan

A home equity loan can be considered a second mortgage. A home equity loan allows you to borrow a lump sum of money using the equity you have built in your home. A typical repayment for a home equity loan is between 5 and 30 years.

You can calculate your home’s “loan to value” ratio by dividing the amount you owe by the value of your home. For example, you owe $150,000 on a home worth $300,000. That’s $150,00/$300,000 = 0.5 or 50 percent loan to value. This means that you have 50% equity in your home. After calculating your home equity, compare it to your lenders maximum LTV ratio to see if you quality for a home equity loan. After confirming that you may qualify for a home equity loan you can calculate how much you may borrow by multiplying the value of your home by the maximum LTV of the lender and subtracting your mortgage balance.

 

Pros & Cons

Home equity loans are great for people who want to fund home improvement projects because the interest you pay will be tax deductible if the money is used for renovations, according to BankRate.

 

Home equity loans offer competitive interest rates when compared to other options.

 

Pros

Cons

Low interest rates

Closing costs can be expensive

Fixed monthly payments

For those who want to pay it off fast, they have longer funding timeline than personal loans

Interest may be tax deductible

Risk of losing your home if you are unable to make payments

 

Home Equity Loan vs. Home Equity Line of Credit (HELOC)

Both home equity loans and HELOCs are secured against the value of your home equity. However, a home equity loan is a lump sum of money and a HELOC is a revolving line of credit, similar to a credit card.

 

A HELOC may be harder to secure than a personal loan or home equity loan therefore you need good credit and a high LTV ratio.

 

3. Credit Cards

Credit cards are always an option for financing home improvement projects. However, credit cards are likely to be the most costly option when financing new flooring. Moreover, the interest rates will likely be higher with credit cards, making them harder to pay off over time. Credit cards can be obtained regardless of credit issues and therefore can be the most flexible option for a broader range of credit histories.

 

Reasons to Install New Flooring

 

Upgrade according to your style

Installing new flooring is a good option if you have recently purchased a home and the style is not quite to your liking. For example, if you have purchased or are considering purchasing an older home but prefer a more modern feel, adding new flooring is a great place to start. New flooring will upgrade your home while also bringing comfort and increasing the satisfaction of your purchase. According to the National Association of Realtors (NAR) after installing new flooring 78% of people reported a greater desire to spend time at home and 67% of people reported a greater sense of enjoyment in their home.

If you want a fresh look for your home, flooring is a great place to start. Flooring is an important part in each room of the house. Maybe you want a cohesive look throughout the house or maybe you would like to switch things up from room to room, whatever you are looking for new flooring is an excellent option to upgrade your space.

Replacing carpet flooring with hardwood is very popular as it can make the space feel larger. Hardwood offers many other benefits such as easy clean up and minimal upkeep.

 

Increase home resale value

If you are thinking of putting your house on the market, a floor upgrade is a great way to increase your home’s value. Potential buyers will notice if the floor is worse-for-wear and upgrading according to current trends will increase interest in your home.

 

Other Factors to Consider:

 

Material

Carpet flooring might be a better option for families with young children or in locations where more insulation is necessary. However, while carpet flooring has its benefits but also it can have drawbacks. A large drawback is that it can have adverse effects on your health. If you have noticed an increase in allergies or asthma within your family you might have your carpet flooring to blame. Carpet flooring is known to store allergens such as dust and dander. Installing hardwood, tile, or laminate flooring will remove those factors and possibly improve your family’s overall health.

Tile flooring is a popular choice for bathrooms and kitchens because of its durability. Tile is also easy to clean and does not easily stain.

Hardwood flooring is by far the most popular choice for homeowners and potential buyers. It is aesthetically pleasing as it comes in many different hues and styles. Moreover, hardwood can last decades if properly taken care of.

 

Functionality

Your floor sees a lot of day-to-day use. Depending on your daily routine some parts of your floor may see more damage than others. It could be possible that some parts of the floor may be getting harder to clean or maybe even have a squeak to them. If that is the case then it might be time to consider new flooring. Maybe you have recently decided to add a home gym or office to your house. If this is the case then you might need to upgrade your flooring for these new uses.

Depending on where you live you might want to look into how flooring can help the insulation of your home. Some flooring offers better insulation than others therefore possibly decreasing costs on utility bills. Moreover, maybe you would like to splurge and get heated floors for a bathroom in your home. This is more expensive but depending on where you live or the level of comfort you are looking for it might be worth it.

 

Would new floors increase the value of your home?

What type of flooring offers best resale value?

Hardwood floors are by far the most attractive to potential buyers. Therefore, installing real hardwood flooring can provide style and potentially a higher resale value for your home whether you are considering selling sooner or later. Real estate agents have estimated that in identical homes, homes with wood floors can sell for up to 10 percent more. HomeLight says that 54% of buyers are willing to pay more for homes decked out in hardwood. So if the main reason for installing new flooring in your home is to increase resale value, hardwood flooring seems to be the best option.

Hardwood flooring is, on average, the most expensive material including cost of labor for installation. However, as mentioned above, it is also the most likely to catch potential buyers attention and buyers are often willing to pay more for hardwood flooring throughout the house.

 

Average ROI on New Flooring

According to a 2019 study conducted by the NAR, homeowners are able to recover 106% of the value when installing new hardwood flooring. Therefore if you invest $4,700 for new hardwood flooring the cost recovered would be $5,000.

 

Conclusion

Is it really worth it?

Installing new flooring is almost never a bad investment. On average new hardwood flooring can only increase the overall value of your home. If you prefer carpet flooring in the bedrooms that is also a popular option for families. If you are considering selling your home soon, installing new flooring can be a cost-effective way of increasing the value of your home. If you plan on staying in your home long term then new flooring will last longer and provide comfort to you and your family.

 

References

https://www.investopedia.com/mortgage/heloc/

https://www.homeadvisor.com/cost/flooring/install-flooring/#refloor

https://www.homelight.com/blog/what-flooring-increases-home-value/

https://cdn.nar.realtor/sites/default/files/documents/2019-remodeling-impact-10-03-2019.pdf

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