Are you considering renovating your home? If so, you are probably asking yourself: “How do I finance my home renovation?” You can borrow up to $100,000 of your home’s equity, which can pay for the renovation of your entire house. Getting this much money out of your home can help you afford the renovation, but you must be sure to choose a lender who has a good reputation for dealing with homeowners. The following tips will help you decide how to finance your home renovation.
First of all, you need to decide what kind of loan to get. Home equity loans, otherwise known as HELOC, are a popular choice for homeowners. A HELOC loan can help you cover the entire cost of renovation, especially since the interest rates on such loans are usually low. It also has the added benefit of being flexible with repayment terms. However, it can be risky, so you should research different options before making a final decision.
You will need to submit detailed cost estimates for all aspects of your renovation, from appliances to tradespeople. The bank will want to see these costings. You should also gather as many references as you can. If you have a credit history that is a long time, this could be an advantage for you. Using an established lender can save you time and money. You will need to submit a new application, which will ask for your financial and personal information.
The most common way to finance your home renovation is by refinancing your existing home loan. You can refinance the existing loan and increase the loan amount by the cost of your renovation. Your new loan balance will be secured against the equity in your property. If you have less than 80% equity in your home, refinancing may not be the best option. The new loan balance should be at least $100,000, but don’t forget to check with your lender if this is an option for you.
Another option to finance your home renovation is to take out a home equity line of credit (HELOC). This type of loan can be longer in process, but you can use as much of the available balance as you need. The only downside is that you will have to make minimum payments on the loan. The interest rates on HELOCs are much higher than those of store credit cards, so if you are already several years into your mortgage, this may be the better option.
If you don’t have enough cash on hand to complete your home renovation, you may be able to use a personal loan. Banks and credit unions typically offer home renovation loans. However, you can also use an online lender. Online lenders typically offer better rates and terms than brick-and-mortar financial institutions. Oftentimes, these loans are easier to qualify for. You may need a higher credit score to qualify for these loans, but you should know that there are options available.