Paying for replacement windows and doors

Are you thinking of replacing your windows and doors? Prices for a home improvement project like that can have a huge impact on your finances. Still, keeping your windows and doors up to date can have a serious pay-off. A few years ago, Money Magazine estimated that window replacement could return as much as 90 percent on investment when you sold your house. While the housing market has changed drastically since then and ROI varies due to many factors, energy-efficient windows that are Energy Star-certified can potentially shave hundreds of dollars off your yearly utility bill. Best of all, replacing your existing windows with energy-efficient ones could qualify you for a federal tax credit for 2011.

Where to start

When it comes to windows and doors, prices can vary dramatically. A little bit of product research can go a long way, especially when you're starting to outline a project budget. The National Association of the Remodeling Industry draws a parallel between home renovations and buying a new car: you might have a basic idea of what you want, but the minute you add customizable options (such as tinted glass and double- or triple-paned glass) the costs can quickly pile up.

You might want to begin this project by asking yourself the following questions:

1. How much can you comfortably spend?
2. What is the price range for the products you are considering?
3. Do you need to replace more than just the windows--things like weather stripping and window frames?
4. Who is going to install the windows, and what do they charge?

Payment options

Yes, replacing your windows can save you money in the long run. But how do you pay for such a project in the first place? Your options may include these:

1. Cash. Use your savings to pay for the project out of pocket.
2. Credit. Use your credit card.
3. Home equity fixed-rate loan. A one-time loan that's based on the value of your home. Your interest rate and payment schedule will be "locked in" at the time you take out the loan.
4. Home equity line of credit. An "open-ended" loan that has a spending limit. It works somewhat like a credit card. Borrow as much as you'd like (up to your limit). Interest rates vary and are subject to change.

If you're thinking about taking out a loan for your window replacement project, it's a good idea to talk to a financial advisor beforehand. Also talk to a professional contractor, not only to get a sense of total project cost, but to see if he/she can work out a payment plan, so that you can pay for the project over time instead of in one lump sum.