Thinking about renovating your home? You must determine your budget prior to making any major home renovation plans. Consider speaking with a lender to discuss all of your options. Ask how you can be pre-approved for a loan and then discuss it with your renovator. Although you may have assets to liquidate, or savings to spend, it’s a good idea to see what a lender can do for you.
Home Renovation Financing Options
This is a loan that is paid off within a period of one to five years, and may carry a fixed or a variable interest rate. As soon as you are finished paying off your personal loan, it is closed. If, at some point, you want another loan you will have to be re-approved at that time.
Personal Line of Credit
If you want to do on-going renovations in smaller portions, a personal line of credit is a great financing option. When you meet with your lender, a borrowing limit will be established. You will be given a revolving credit line available when you need it. The lender will provide a monthly statement showing your expenditures and the amount of interest that is payable. As you continue to pay off your line of credit, you can borrow unused funds without the need to reapply. The rate charged by most credit card and personal loan companies is higher than the rate for a personal line of credit.
Secured Lines of Credit and Home Equity Loans
Both of these options depend on the equity of your home as collateral. They are very economical methods for people who have built enough equity in their properties. Furthermore, they are opened at no cost, offered at preferred interest rates and you get the advantages of all versions of unsecured loans. Unfortunately, secured lines of credit and home equity loans require appraisal and legal fees.
Refinancing Homeowner Mortgage
Do you have an existing mortgage? You can refinance it when you wish to renovate extensively in a long period of time. Most lenders will let you borrow as much as ninety percent of the value of your home, minus the pending balance of any existing mortgage. Therefore, you can take advantage of lower mortgage rates and avoid high costs of obtaining a loan or credit card loan. If you want a loan that is eighty percent or more of the appraisal value of your property, then you must insure it against default on your part. Mortgage insurance premium may be paid upfront or it may be added to the mortgage amount.
There are items that will not be covered in the contract that you will get from your home renovation expert. Hence, most lenders advise that you save a given percentage of your loan funds to cover these items. As soon as the renovations start, you might decide to upgrade furniture, curtains or appliances with the amount you have set aside instead of borrowing more from the lender.