Personal Finance, Loans & Insurance

Homes need updating. Aside from the cosmetics of tiles and paint colors, there are the basic, but necessary renovations that need to be taken care of as well.

Young home buyers frequently enter into a mortgage commitment scraping together all they have to offer a decent down payment and having calculated what they need to be able to afford the monthly payments. What they may not take into as serious account are the monthly utility bills and the eventual (inevitable) costs of house and property upkeep.

Those requirements may be acknowledged as necessary somewhere down the road, but since they are not immanent, the couple may simply assume they will come up with the money from somewhere when the needs are more pressing.

However, from re-shingling a roof to weather-proofing your windows, major home improvement projects are a part of home ownership. Unfortunately, they’re also costly and there isn’t always room in the family budget for a full overhaul of the heating and ventilation system. That’s where home improvement financing comes in.

For those who don’t have much extra money saved, home improvement financing allows homeowners to borrow what they need for renovations. Sometimes the house itself is used as equity and in other situations, little to no equity is required. Keep reading to learn about the different types of home improvement project financing.

Home Equity Loan

The terms for any loan, including a home improvement or renovation financing loan, will vary depending on the borrower. If you have good credit, your mortgage is paid off and you’re willing to put your house forward as equity, then you can expect to get great rates payable over a period of months or years.

You could even opt for a second mortgage, which will get you rates close to prime. However, while a home equity loan obtains for you a lump sum up front, remember that you’ll start paying interest on that entire sum right away.

Line of Credit

One of the easiest ways to borrow money is through a home equity line of credit. A line of credit allows you to only borrow as you need, therefore only paying interest on what you use. The rates, if your credit is good, are great and they’re often approved fairly quickly and painlessly.

Remodeling or Home Improvement Loan

Many banks offer remodeling or renovation-specific loan programs. These work by combining a construction loan with a mortgage and are based on the projected value of the home after you complete your project.

You will most likely have to submit a building plan as well as a breakdown of all your project expenses. The bank then usually releases the money in increments, as the project progresses.

Credit Cards

If your credit isn’t as good or you’re still building it, you may opt for a small amount of financing that will let you complete the project without being overwhelmed by debt. An example of this might even be store credit from a local store – just enough to purchase a new furnace or the materials you need to retile your floors.

As more and more businesses seek to reduce costs – one area that is a likely candidate is that of the financial staff supporting projects of work.

As centralisation and outsourcing continues to be a key driver in cost reduction in many large firms, what is often cut is what is seen as the “non-adding” value staff. The issue arises is that these staff are usually the ones who are out of site of the head finance managers, work numerous hours on assisting in the delivery of projects and yet are not really seen by the “latest” re-organisation as adding value. They will insist that a light-touch financial management from a central finance function will do just as well.

The Project Financial Accountant or Financial Manager is one such staff member. Before I launch to the project accountants defence it has to be noted that having the wrong finance manager in charge of project financial matters is as good as having nobody and therefore is “no value added”, and should go. The problem is that senior management has either little care or little knowledge about what it is like to correctly financially manage a large programme of work. They consider their FX manager – controls £250m worth of foreign exchange in the year – we only need one of him or her, so why for a £50m programme of work do we need a full time accountant. Possibly you don’t – however that is another debate for another day – you will at least need part of one!!!

The result is that all the financial management of the programme is handed over to the Programme Director – who will in turn hand it over to their Programme Manager. Both may or may not have sat through the half day session on project finance within Prince or PMI, and both will be of reasonable intelligence – so what is the worry – the finances are in good hands!!!

Let’s look at it from a more realistic direction – why you need a strong Project Financial Manager:

A Project Manager is not a Financial Manager – they are fully responsible for their project – however financial control is not their key skill. Most companies will require some form of upwards reporting of the project monthly financial results – these are always complicated ways – again not the usual world for your PM. Financial management (no matter how financially astute they are) will always play second fiddle to “project delivery” on a project managers “to do” list. The loss of detailed analysis and review by financial staff results in missed opportunity and cost avoidance. As a real life example CJM Project financial Management Ltd recently worked with the Project Director of a global programme – reducing the original estimate of an IS consultancy and development firm by £350,000. It was a good day at the office. These large projects are in the scale of FTSE 350/250 companies yet many companies and public bodies will only provide a light touch financial support to them – we would not expect such a company to run without adequate financial support – why do we allow projects. Management decision-making is impeded, as there is no financial support to produce robust, relevant and detailed reporting to the steering group or other management teams. Minimal financial support during business case creation can result in initial budgets being wrong – resulting in over / under estimates of funding in the financial year. Relationship building and being part of the project enables greater understanding and greater control and provides the Programme Director access to specific financial direction and advice – light touch removes this ability. Dedicated finance managers provide a faster reaction to issues, which may have financial implications. This can be done via creation and delivery of project financial risk and opportunity trackers – this approach mitigates risk and drives opportunity.

All in all – analysis on hiring the correct Project Accountant as part of the core project team will, if hired correctly and with the correct skill set behind them always deliver a project, business or government department considerably more benefits than their cost. Think before you cut that project financial accountant from your headcount – you will regret it. Light touch is sometimes as good as no-touch.