Airy Kitchens Guide to Pricing
At Airy Kitchens, we design and manage a mix of mid-range and high-end kitchens in Philadelphia and the Main Line. Our pricing more closely reflects local labor and cabinetry prices in the mid to high kitchen remodel sector. Our average kitchen project cost from June 2018 - June 2019 was $73,715.
After hearing all of these big numbers, you’re probably ready for more detail about how they add up. Understanding the smaller expenses is a great way to budget and save for your project. Here is a handy cost guide we share with our clients:
Financing Your Remodel
Okay, you’ve heard about the cost and (of course) it’s way more than you expected. So what are your options? We spoke with Arthur Jones of PNC bank to understand financing options for home owners. Let’s look at five options:
Home Equity Loan (second mortgage)
‘Rates have really dropped’ Jones says, and the more you borrow, the better the rate. Loans of more than $50K are currently running a 4-5% interest rate. Typically banks loan up to 80% of your homes value, but can loan up to 90% for a higher rate. Arthur noted that at PNC Bank, they only consider the homes current value, not the value after the renovation. Loan term can be a full 30 years like a standard mortgage, but Arthur says that home owners typically choose a shorter term which gets them a better rate . Unlike a refinance, there are no considerable closing costs.
Home Equity Line of Credit (HELOC)
This loan has similar rates to a home equity loan, it can also be up to 80-90% of your total home value, and has no considerable closing costs. What makes this choice different is more flexibility. Your bank gives you an amount that you can take out, but you take the money as you need it and you don’t pay interest on the amount you haven’t drawn yet. This is a great option for projects that have a long timeframe and projects that may need additional funds (most older houses). Arthur also made the point that you can take out a higher amount loan to get a better rate even if you don’t need to use all the funds. He says a $75K line of credit has an interest rate of 5.63%, but for $100K you could get a 4.75% interest rate.
Home Improvement Loan or Construction Loan:
Arthur says PNC does not currently offer a construction loan, but they plan to add one and he recommended Santander (talk to my favorite manager Diane in Chestnut Hill!). Many banks base the loan on ‘as completed value’, (value after the renovation is complete) for this type of loan which means you may be able to borrow more. However, the bank is more involved in the whole process. They usually put the money in an escrow account and have a consultant monitor completion points and payments. This might slow the construction process down. If you are looking to purchase a fixer upper and take out a mortgage and renovation loan together, Arthur recommends this loan. The bank will package the mortgage and renovation loans together. Arthur notes that banks “can also package this as a line of credit, but in the end it converts to one loan with one payment.”
Similar to a construction loan, the FHA 203K is geared toward the purchase of a fixer upper (often uninhabitable) and the bank is involved in the process. But now the government is involved too. Sounds fun, right? Arthur notes “its not really supposed to be a luxury renovation as much as a functional or livable project”. More hoops to jump through will get you a better rate and the ability to borrow up to 96.5% of the ‘as completed value’. This is not available to an investor, only to homeowners and non profits.
Arthur mentioned that a home owner may want to refinance their mortgage to fund their renovation. This is a good option if your current loan has a high rate or if you want to change the length. Unlike a home equity loan, refinancing comes with closing costs. Arthur quoted an average of $3000-4000, but it could be higher for an expensive home.
To wrap up our finance discussion, we also discussed a few other points with Arthur Jones.
Timeframe: Arthur says a home equity loan or line of credit typically takes four to five weeks. He suggests meeting with your lender before bringing on a designer or contractor so you know how much you can afford.
Other Tips: Don’t quit your job or retire before you take out the loan. Arthur said most of these loans are not as difficult as getting a mortgage, but suggests that home owners be careful not to do a lot of credit checks before applying because it can drop your credit score.
Why Work with him? Arthur has been in the business for thirty years and knows the process of working in Philadelphia and the surrounding local areas. He helps his clients from beginning to end and says his customer service is ‘top notch’.