As the saying goes, your home is your castle, and nothing is better than fortifying that castle with an incredible kitchen and a brand-new roof. Some homeowners might renovate their homes to better fit their needs and others might do it to get a home ready to sell. However, renovations are not as easy as picking out the right wall paint. Many homeowners struggle with figuring out how they will finance the project in the first place. If you find yourself in this situation, here are some of the best ways you can begin financing your home renovation project today.
Home Equity Loans
If you are amongst the millions of Americans that have received a mortgage to help pay your house than more likely than not it has accumulated some equity over the years. This means if your home is today worth 500K and you only owe 200K then that amount is what you can receive as a loan. Now, you might also be faced with what is called a home equity line of credit. According to LendEdu, this similar to a home equity loan as it also borrows against the home’s value but you only start paying after you’ve established an outstanding balance. Home equity loans require instant monthly repayment but unlike the credit route, it contains a fix interest rate rather than a variable rate.
FHA 203(k) Loans
If you’re looking to purchase a fixer-upper, you might run into the obstacle of having to pay the home as well as the repairs. This is where an FHA 203(K) or Rehab Loan comes in. This is an especially great route to take if you have your heart set on a fixer-upper. This is especially important because most banks will not approve a loan on these particular loans. However, like any loan on this list, it does contain its cons. One of the most important of these is not being able to work on the home yourself. Often working on projects can save you money, but according to Cotney Construction Law, when it comes to FHA 203K loans, there is a rule that states that you must hire only professional contractors to do the job; no DIY allowed. Other cons include more paperwork and fewer lender choices, and they will take a lot longer to close.
If you don’t want to go through the whole system of having to refinance your home or to apply for special requests at the bank, a quick loan might just be your best bet. The renovations being made within your home may not need a special contractor or a demolition team but simply some elbow grease and a few tools. Quick loans are very easy to obtain because they require little to no credit. According to Real Estate Elevated, hard money loans tend to come with higher interest rates and origination fees compared to other loans. However, if your project is quick and easy, then you might be better off seeking a quick loan.
Renovation projects are a great way to truly make your house a home while increasing its value at the same time. However, homeowners must never lose focus on the most important factor, the financing of the project itself. Constant errors in judgment and a lack of research can make this very exciting time for you and your family into a financial nightmare.