A $400 window? Sure, no big deal. But when you’re trying to improve your home’s energy performance or just swapping out aging, failing windows, often a single window replacement is not going to cut it. And when you multiply that $400 by all the windows in your home—not to mention installation costs—things can get pricey pretty quickly.
If you don’t have the cash saved to pay for your window replacements up front, you do have some options at your disposal to help you cover the cost of this project. In fact, there are a variety of different lending programs available that can get your windows installed fast. But of course, each one comes with its benefits—and its drawbacks. Here’s the skinny on window financing.
Financing Through Your Window Dealer
Many window dealers offer direct lines of credit through the windows manufacturer to cover the cost of new windows. If your dealer works directly with their own installers, they may cover the costs of installation, too.
- You’ll know exactly how much to loan. One of the major benefits of going through your dealer is convenience. Not only can your salesperson provide you with a precise cost estimate, they’ll generally be able to see if you’re qualified fairly quickly, making the whole process smoother.
- Dealerships may have high interest rates. Contractor financing may be easier, but that doesn’t mean it’s always the best, particularly if you have access to a secured loan through a bank or other lending option. Dealerships tend to be less picky in their approval process, which raises interest rates overall.
Taking Out a Home Equity Loan or Refinancing Your Mortgage
If you’ve established a good payment history through your mortgage, you may be able to refinance and release money to make home repairs, or ask your lender for a home equity line of credit, which you can use to make your window replacements.
- Better interest rates. Borrowing against your home’s value offers some collateral, meaning you’ll typically be able to secure better interest rates and lower monthly payments.
- Unpaid loans could lead to foreclosure. On the other hand, putting your home up for collateral is always at least a minimal risk. Your lender is legally allowed to foreclose on your home if you don’t make payments on this loan.
- It will take you longer to pay off your mortgage. Obviously, any additional money you borrow extends the length of your loan, meaning it may take longer until you’re debt-free from your home purchase.
Using Your Existing Credit Cards
If you own a home, chances are you already have a credit card or two that you use for major purchases and emergencies. Many homeowners choose to pay for their window replacements with their existing lines of credit.
- You won’t need to apply for a new credit line. Having a credit card cuts out the approval process—and means you won’t have to open a new credit line, which can sometimes affect your credit score.
- Carrying too much debt on your credit cards can harm your credit. Depending on the number of windows you need to replace, and the types of options you choose to go with, a full window replacement could run you in the tens of thousands of dollars. Most finance experts recommend that you only use about 30 percent of your credit card’s credit line to keep your credit in good health.
Paying Using a Personal Loan
An unsecured loan offered through your bank or credit union is often a good way to pay for smaller home improvements. Depending on the scope of your window replacement project, it can be an alternative to a home-backed equity loan.
- You won’t need to offer your home as collateral. Since a personal loan is unsecured, your loan amount will be backed by your credit history and risk. That means you won’t have to forfeit your home if something goes wrong.
- Your interest rates may be higher. Like any unsecured loan, personal bank loans tend to have higher interest rates.
- You may need to have outstanding credit to be eligible. Banks don’t give out loans lightly. Typically, lenders like your score to be in the high 600s or better, and other factors, like the portion of debt you have on your credit cards, may also factor in, too.
Applying for a Federal Housing Administration Loan
The FHA’s Title 1 loans offer amounts up to $25,000 for single home families hoping to make improvements. They also have a special program called the FHA PowerSaver Home Energy Retrofit Loan Pilot Program for renovations aimed at increasing a home’s energy efficiency—which might be of interest if you’re purchasing high performance windows.
- Loans typically have lower interest rates. A loan from the FHA typically has a fair market interest rate for your area, which is a lot lower than a credit card would.
- You may have to deal with a lot of red tape. Anytime you lend from a government agency, you may come across delays and extra steps that delay the lending process.
- You’ll have to put your mortgage deed on the line if the amount is over $7,500. If you need to borrow a lot of money to pay for your windows, you’ll have to put your home up as collateral.
No matter what kind of method you choose to finance your project, though, try to pay it off as quickly as possible so you can save—and enjoy your new windows debt-free!