Can You Afford New Kitchen Cabinet Doors?
You really want those new cabinet doors, but can you afford them? The "Hanley Wood Housing 360: Insights into Remodeling" report from October 2011 found that 80 percent of homeowners use their personal savings to fund a remodeling project. Credit cards, insurance claims and home equity lines of credit usually finance the rest. If you don't want to dip into your savings but hope to finance your project instead, here's what you need to know.
How to plan your custom kitchen budget
It always helps to have a good idea of what you might need to spend before you move forward with any aspect of your kitchen cabinet remodel. Do your research into materials and installation costs. Don't forget to research "hidden" costs such as delivery and shipping, disposal of your old cabinet door fronts and those little extras, such as new trim or moldings.
Keep in mind that if you intend to stay in your home for a long time, spending more on your remodel might make sense. But if you will be moving in the near future, take care to spend only what you need to make the remodel look good -- don't overspend for the neighborhood, and don't spend all your savings on a project you will be walking away from within a year or so.
Start where the lenders do
Now that you have all of the proper information, look at your finances with a critical eye. One of the first things a lender looks at is your debt to income ratio (DTI). You can figure it out like this:
- Write down your total monthly expenses.
- Add in the projected cost of your remodeling expenses.
- Write down the total.
- Divide the total by your gross monthly income.
- The result is your DTI percentage.
Each lender has a different DTI percentage they will accept. If your percentage is higher than that, they might not give you a loan. However, there are other options, such as debt consolidation.
Another aspect a lender looks at is how much you can actually afford per month. The calculation goes like this:
- Multiply your gross monthly income by the lender's maximum DTI percentage.
- Write down your subtotal.
- Subtract your total monthly expenses.
- The result is your maximum affordable payment.
If the maximum affordable payment is a negative number, then you likely won't be able to borrow money from that lender.
If you determine that you can get a loan, start shopping around for the best rates. If it appears you might not be able to get a loan for your custom kitchen, consider revamping your budget and dipping into your personal savings in order to make the work happen. If you're not sure where to cut corners, a consultation with a good local contractor can help you figure out how to make the project fit the budget.
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Can you afford new kitchen cabinet doors?
Original content written by Amy Fanter, Face Your Kitchen Columnist at Face Your Kitchen.