It’s Home Improvement Month, and we want to empower and celebrate home improvement contractors. More people at home, and working from home, has caused an increase in the wear-and-tear on their houses—and the need for home improvements and home improvement financing options.*
This month, we’ll share blogs on:
- How financing know-how can simplify your home improvement business
- Contractor tips to a more consultative approach to financing options
- How contractors can position financing to meet client demands for more energy-efficient upgrades
- A celebration of contractors during a past year unlike any other
This is the first blog in our Home Improvement Month series.
Increasingly, homeowners have distinctly different options—and preferences—for how they pay for home improvement projects. It’s important for contractors to understand the advantages and disadvantages of each to leverage the right options at the right time in the sales and planning process of a project.
There are three ways that home improvement financing know-how can simplify your business, sales process and customer experience:
- The timing of the finance conversation is critical to closing a sale.
- Payment options at the point of sale add credibility and trustworthiness between you and your customer.
- Understanding of different types of finance options (home improvement finance loans, credit cards, home equity loans, etc.) provides you the ability to offer homeowners options—which impact speed and overall affordability.
Discussion Timing
When and where you initiate the discussion around home repair loans or payment options can influence your ability to effectively manage your business: cash flow, project timelines and resource management.
How much the repairs will cost depends on their choice of product—do they want good, better or best? When you bring financing options up early in the process, you get a chance to understand their financing needs and your opportunity to sell the most energy-efficient products. You can be direct about that early in your process to determine if they will be able to make immediate payments or if they will require financing with longer repayment timelines. For example, home equity loans are subject to a lengthy approval process including a formal appraisal—all of which can take weeks before you get a decision. This limits your ability to plan resources immediately and gives the competition a chance to come in for a second or third quote.
Before you’re far into a project proposal, you need to understand your client’s financing plans. You can simplify your own planning by addressing home improvement financing options at the start of your sales process and seize the opportunity to upsell by providing the client with financing options that make the most sense for them.
Providing Home Repair Payment Options
There’s a good chance your customers won’t want to pay the full cost of their home improvement project upfront in cash—and, at the very least, they’ll probably want to know what their options are. Understanding the full range of home improvement financing options available and helping your customer determine the right choice for their specific situation can help maximize your chance of closing a deal.
Next, we’ll look at the most common home improvement financing options:
- Traditionally, the main sources of financing for home improvements have been home equity loans and home equity lines of credit (HELOC). Because they are secured by the equity in the house itself, home equity financing typically offers lower interest rates than other options; as of March 6, 2021, the average rate for a 15-year fixed-rate home equity loan was 5.82%, and the average rate for a variable-rate HELOC was 5.61%†. However, the low interest rate comes with disadvantages (such as the lengthy approval process.)
- Specialty financing or home improvement loans are also an increasingly popular alternative to traditional home equity financing options. And for some homeowners, they provide an appealing middle-of-the-road solution because they can be much easier to apply for than home equity loans. For example, standard installment loans offered through Mosaic’s platform* currently (as of May 2021) feature APRs from 2.99% to 11.99%**, depending on the length of the loan term. This makes them comparable to home equity financing in some cases and significantly cheaper than the credit card rates cited by Wallethub.
- Credit card financing is another popular option that is dependent on a homeowner’s credit limit. According to Experian data, the average credit card limit is under $10,000 and can have higher interest rates than a HELOC or home improvement loan.
We’ll dive deeper into how each of these financing options can position you as a trustworthy and consultative contractor in our next blog in this series.
Maintaining Control of Your Project Margins
With knowledge about how different financing options can influence your bottom line, you get better control over the margins of your home improvement business. You need to know if your transaction will include credit card fees, or if slow HELOC approvals might delay the funding of your project. Every financing option not only presents different impacts to your clients’ funds, each also introduces potential costs to your business. When you simplify and control the financing options in your processes, you maintain better control of your project margins.
Knowledge is Good for Business
Knowing how these three factors influence your business and processes ultimately maximizes your customers’ satisfaction. You are the expert in your craft, and homeowners look to you to walk them through every step of the process to achieve the home improvements they desire. When you sharpen your understanding of their financing option’s impacts on your project, you sharpen your customer experience—and that’s good business.
Stay tuned for our next blog in this series, where we’ll outline how a consultative approach to home improvement financing creates a competitive edge.
† https://www.valuepenguin.com/mortgages/average-home-equity-loan-rates
* Home Improvement Loans through the Mosaic Platform are made by WebBank, Member FDIC, Equal Housing Lender. 
** APRs may vary with loan terms and payment features. Rates and terms are subject to change without notice.