Do you love where you live, but your house needs some improvements? If so, you should consider using a home improvement loan to transform your house into your dream home. Here’s why this season is the time to take on a home renovation project.
Common Home Improvement Loan Options
There are many ways to finance work on your home. The key to choosing one that works for you often depends on your current financial position and your home’s equity. The most common types of home loan options are listed below.
Many consumers head to their bank for a loan to finance a bathroom or kitchen remodel. These loans are considered unsecured credit since you don’t need to back up the loan with any collateral. Today’s loan interest rates make this a healthy option if you can afford to repay the loan without difficulty.
Home Equity Loan
Do you own a lot of equity in your home? If you’ve accumulated a bunch of equity, you can tap into it by taking out a home equity loan. Generally, financial institutions will grant you up to eighty-five percent of your total equity in a loan. Keep in mind that your house is on the line if you don’t keep up with the loan payments.
Home Equity Line of Credit
A home equity line of credit, routinely called a HELOC, allows you to borrow money as needed from your home’s equity. As with the home equity loan, you usually can’t borrow more than eighty-five percent of the total equity. Additionally, lenders prefer that you have a minimum of twenty percent equity to establish a HELOC. Don’t forget that you’re using your home as collateral, so you must make your loan payments on time.
FHA 203 (k)
Insured through the Federal Housing Administration, an FHA 203 (k) is an affordable way to finance home renovation projects. This loan differs from others in that the loan becomes part of your home mortgage. You’ll repay the loan through your monthly home loan payments.
Another popular mortgage program for renovations is Fannie Mae’s Home Style loan. Requiring as little as 5% down, this program may come with some additional flexibilities for allowed renovations that the FHA 203 (k) may not.
Choose a Loan That Fits
It’s sometimes challenging to choose the right loan with so many ways to fund your home renovation project. Here’s where we recommend that you do a little work and then contact an expert mortgage broker.
How Much Will the Project Cost?
Before you start considering loans, it’s a smart idea to consider your budget carefully. Home improvement projects cost money, and you’ll be happier in the long run if you think about the dollars before you begin the funding process.
Bankrate suggests that you first dive into what you want to achieve with the renovation project. Why do you want to renovate your home? Taking the time to limit the project’s scope to what you need and can afford is crucial to the home renovation success.
Once you have a thorough concept of the project, interview several local contractors. An experienced home improvement contractor can help you to understand the costs involved in your proposed project. Home renovation costs vary widely depending on such things as materials, labor, and time of year.
Speak with a Mortgage Broker
Knowing how much money you need for the project will make interviewing a mortgage broker a much easier task. Top-notch lenders have access to many different financing opportunities. They will match you with the ones that match your situation.
Generally, the best match for you depends on such things as:
- Your Credit Score
- Your Home Equity
- How You Want to Repay the Loan
- How Fast You Need the Funds
Improve your credit rating before undertaking a home renovation. Paying your bills on time and paying off high-interest credit card balances can raise your score. Higher credit ratings help you qualify for a more advantageous home improvement loan.
Start the Renovation Project
Finalizing your home improvement loan means that you can start the project. Interview several firms to locate an outstanding contractor that shares your vision. Don’t forget to ask for references and proof of licensing and insurance.
Expect some mess and inconvenience during the construction process. An excellent contractor works hard to minimize clutter and indoor air pollution. Still, remodeling projects will inevitably disrupt your home life to some extent.
Consider what you’ll do with your children and pets while tradespeople are in your house. It’s safer to keep pets and kids confined to another area of the house.
Remember that unexpected things can come up during a renovation. Mold, lousy weather, and material delays are just a few of the reasons that a project might take longer than expected to complete.
Above all, relax and roll with the process. A home improvement project allows you to fall more deeply in love with your home. You might also reap the benefit of an increased home value.
Lastly, now is a great time to invest in your home through a renovation project. With many loan options on the market, there is sure to be a home improvement loan that suits your circumstances.
The home loan officers at Strategic Mortgage Solutions are eager to help Eugene area homeowners locate an optimal home improvement loan. Contact us to discuss how you can fund your next project.