A home renovation loan is a great way for homeowners to finance their renovation projects. A home renovation loan is often wrapped into a mortgage loan as funding for a fixer-upper home. A key factor of home renovation loans is the “after renovation” value. Renovation loans are based on the estimated value of your home after the renovation. The estimated rise in home value, due to the proposed renovation, can increase how much you can borrow and help you get the lowest rate possible.
When To Consider a Home Renovation Loan
You may consider getting this type of loan if you are interested in buying a home and fixing it up. There are also other types of home renovation loans such as personal loans or a cash-out refinance. With a cash-out refinance, you can cash out a portion of the equity you have in the home and use the proceeds for your renovation project. Home equity loans are another option for home renovation financing. One benefit of a home equity loan is that because each payment goes towards the loan’s principal, you would be building your equity back up immediately.
Advantages of a Home Renovation Loan
Home renovation loans can cover costs for desired renovations that could add value to the house, such as installing or updating heating and cooling systems or updating your kitchen. In this case, buyers can gain equity faster than they normally would when buying a move-in ready home. With a renovation refinance, you can also take advantage of low interest rates and change the terms of your existing loan. At a lower rate, you may be able to borrow more without drastically changing your monthly mortgage payment. Remodeling can also be an alternative to buying, as home inventory across the nation is currently low. Contact one of our Loan Consultants to learn more.