You have a remodeling project in mind and you can't wait to get started. It will create space in your home that you never thought existed. You have put your ideas on paper and then it hits you-how will we pay for this home project?

For many homeowners sitting down and discussing the financing of a home remodeling project is a scary thought. Most homeowners have no idea what remodeling projects cost until they get the first estimate. They then discover that major kitchen makeovers can cost more than most people make in a year. Home additions often cost as much as what you originally paid for your existing home. When it is time to discuss adding on or major renovations you will want to know what your options are for financing the project.

Here are 9 options for financing your home project:

Use Your Savings

If at all possible try to plan saving to do your project. This is the least expensive way to pay for your project. No need to borrow money so you will not have to pay any interest. Just remember to put some money aside for the inevitable emergency.

Borrow From Family or Friends

This is an option that needs to be mentioned but not one I would recommend for obvious reasons.

Use a Credit Card(s) 

Most homeowners have access to these. Interest rate is normally high and potential for huge penalties such as late fees, etc. No tax deduction and should be considered as a last resort.

Take Out a Construction Loan

Apply for just enough to cover the cost of the project. They usually carry higher interest rates and work for homeowners that have no or little home equity. Compare

different loans from different lending institutions you are considering. These are not tax-deductible which is an important consideration.

Get Financed By Your Contractor

Ask your contractor if he offers this service. Compare different loans from different contractors you are considering. Most of these loans are very high interest weighted and should be one of the last options you consider. No tax deduction.

Refinance Your Home 

You will need enough equity in your home to start this process. Compare refinancing rates with a few lenders. Tax-deductible.

Borrow Against Your Retirement Account

If you are fortunate to have money saved away for retirement you can try this way. In most cases you actually pay interest to yourself using this method. Verify this with your account manager. You do lose the interest you could have been making if the money was invested. Another draw back is that you might have to payback the entire loan all at once if you lose your job-beware of this!

Home Equity Loan

Usually a shorter term loan than your first mortgage. You need adequate home equity. It is usually distributed in a lump sum. Normally tax deductible. Once again compare rates with different lenders.

Home Equity Line of Credit 

Usually a shorter term loan than your first mortgage. Sufficient home equity is needed. With this loan you only need to borrow what you need at that time. Normally tax deductible. Comparative shopping for the best rates is advised.

Trying to discover the best way to pay for your home remodeling project can be stressful and almost always brings homeowners back to reality. Be patient, consider all your options, shop for the best possible rates, and plan for success.