Want to make the most of your outdoor space? A deck gives you more opportunities to enjoy the natural world while increasing your space for entertaining. But, in the back of your mind, you may be wondering how you would secure financing for building a custom deck.
Personal loans and home equity loans may look like your best options if you don’t have cash on hand. However, if you’d prefer to avoid debt, there are other ways to secure cash and make your deck dreams a reality.
Before starting your new deck project, let’s explore all your deck financing options. Keep reading this guide for more information on how to pay for a new deck.
Can Decks Be Financed?
Yes—many homeowners are able to secure loans to finance their composite decks or wood decks. As with any home renovation, the expenses can be costly, adding up to around $7,500. This makes deck financing an attractive option.
However, keep in mind that your home improvement loan eligibility and the approved loan amount will depend on factors including your credit score, income, and overall financial history. So, check the requirements first, especially if you have a bad credit score.
Before you start looking into loans, consider what a home improvement project like this requires:
- Decking material type (e.g., pressure-treated lumber, cedar, redwood, etc.)
- Supplies
- Deck style/type (e.g. platform, multi-level, raised, etc.)
- Licensed help
- Furnishings
There are ways to save a few dollars here and there. If you’re handy, you might be able to take on some aspects of the projects yourself.
However, the majority of the job will require a professional—which means you’ll be bound by their budget. It’s best to shop around for quotes from qualified contractors in your immediate area. Keep in mind that the final costs may add up to more on their estimate depending on the changing price of materials and the actual hours that go into the job. This should be factored into your financial plan.
How Do You Finance a Deck Build?
A deck build is a big home investment. So, when it comes to how to pay for a new deck, you need to choose the financing options that will work for you in the long term.
Here are the 7 most common ways homeowners finance their new deck:
1. Cash-Out Refinance
Refinancing your home mortgage allows you to take out some of your home equity in cash. While it may be enough to build your deck or porch, keep in mind that a refinance replaces your old mortgage with a new one. That means new closing costs and a new loan term, keeping you in debt for longer.
2. Construction Loan
If you hire a contractor, they might offer financing to help you pay for your deck or porch. This loan should cover the exact amount you need, but keep in mind that rates and the repayment term vary depending on your credit history and the company you hire.
3. Credit Card
If you already have access to credit, you could put some of your expenses on a card. Keep in mind that credit cards come with a high-interest rate, which means you’ll pay more over time. In addition, utilizing more of your credit can affect your credit score.
4. HELOC
Think of a HELOC or home equity line of credit as a credit card or a revolving line of credit backed by your home equity. You can use HELOC for home improvement for a certain number of years—also known as the draw period—before you have to repay the loan with interest. However, your home is used as collateral, which means that late or missed payments could result in foreclosure proceedings.
5. Home Equity Loan
Similar to a HELOC, a home equity loan is known as a “second mortgage.” A home equity loan for remodeling can be an excellent option for your deck build. You receive a fixed amount of money, and you’ll have to repay it with interest. Just as with a HELOC or home equity line of credit, your home is still used as collateral, so make sure you can keep up with payments even in the event of job or income loss.
6. Personal Loan
A secured personal loan for building a custom deck requires collateral, while an unsecured loan doesn’t but does have higher rates. The drawback is that it has strict qualifications.
7. Loan Alternative
You don’t have to take on more debt to finance your home. Sale-leasebacks make it easy to convert your equity to cash without risking a high-interest rate or fixed monthly payment. Through a sale-leaseback, you can sell your home to convert your equity into cash, and lease back your home until you’re ready to buy back or sell.
How do you know what’s right for you? Well, consider the scale of your home improvement project and the costs. Then, choose the financing option that will guarantee you the money you need without having to sacrifice your financial stability to do so.
Build Your Deck with a Sale-Leaseback Solution
You’ve worked hard to build up the equity in your home. When you need it, you shouldn’t have to risk losing your home in the process.
Whether you plan to make deck repairs or build one from the ground up, a sale-leaseback lets you access the money you need without the risk or interest of a loan for building a deck.
If you're considering a sale-leaseback program, contact a financial advisor to learn more.
Key Takeaways
If you're looking to extend your deck and outdoor living space, there are deck financing options for you. If you are still unsure of options for financing your deck after reading this article, consult a financial advisor to discuss your options.
Sources:
- Forbes. How Much Does It Cost To Build A Deck? https://www.forbes.com/advisor/home-improvement/cost-to-build-a-deck/.
- Consumer Financial Protection Bureau. What is a construction loan? https://www.consumerfinance.gov/ask-cfpb/what-is-a-construction-loan-en-108/
- Federal Trade Commission. Home Equity Loans and Home Equity Lines of Credit. https://consumer.ftc.gov/articles/home-equity-loans-home-equity-lines-credit#HELOC
- Forbes. How Much Does It Cost To Build A Deck? https://www.forbes.com/advisor/home-improvement/cost-to-build-a-deck/.
- Consumer Financial Protection Bureau. What is a construction loan? https://www.consumerfinance.gov/ask-cfpb/what-is-a-construction-loan-en-108/
- Federal Trade Commission. Home Equity Loans and Home Equity Lines of Credit. https://consumer.ftc.gov/articles/home-equity-loans-home-equity-lines-credit#HELOC
