Congratulations! You’ve been handed the keys to your dream home! Well, it will be your dream home after you do a little bit of work on it.
You don’t like the paint in the bathrooms, and the floors could use a serious makeover. Redoing key parts of any home can be expensive. This is especially true after opening up a mortgage and buying a home.
Unless you have a lot of money to play around with, there’s a good chance that you’re going to have to take out a second loan for your home renovations.
How do these types of loans work, and what are your options? We’ve got the answers to all your burning financial questions right here. Keep reading to learn more about getting help for your renovations.
What Is a Home Improvement Loan?
Before we tell you how to get a loan, you need to know what you’re getting yourself into. A home improvement loan will give you the financial help you need to pay for your renovations.
How much you can get all depends on which lender you go through. You might be able to get up to 100,000 dollars if you play your cards right. Like any loan, once you sign all the paperwork, you’ll have a set amount of years to pay the money back.
How Do They Work?
Home improvement loans work the same way that any other loan does. You fill out an application. The application goes to the institution to wait on approval.
Once you get it, the funds will go into your bank account through direct deposit. How long the process takes depends on the lender. Some of them boast next-day approval.
When Should You Consider Taking Out a Loan?
You shouldn’t take loan agreements lightly. If you don’t think that you can make the money you spend worth it in the long run, it’s not something that you need to focus on.
There are a ton of projects that are worth taking out a loan for. One of the biggest ones is attic insulation. Having it will keep your energy bill on the low side.
This will give you more money that you can use to pay back your loan each month and then some.
Manufactured Stone Veneer
Replacing your regular home siding with stone veneer is a pretty worthwhile project to take on. It will give your home a modern touch that will make it popular when it comes time to sell your place.
It’s also so easy to place that you can probably handle it. If you don’t feel too confident in your skills, you can hire someone for the job. Either way, you’re not going to spend that much money on construction and material cost.
Kitchen remodels are a good decision if you’re smart about it. If you adorn the room with marble countertops, it will add a classy touch, but there’s a good chance that you won’t turn a profit.
It’s all about making small improvements to spruce up the place. Not only will you have a kitchen that you can be proud of, but when it comes time to sell, you’ll make your money back.
Replace Your Siding
Replacing your siding will increase your curb appeal and make it more attractive to buyers when it comes time to sell. Before a person buys a house there’s a good chance that they will have a home inspection done. You won’t be able to hide any structural issues, so you might as well fix them.
Where Can You Get the Loan?
So, where can you get a loan to take care of some of the jobs that we’ve listed? If you’re already part of a credit union or bank, that’s a good place to start. If you can’t get a loan through them, you’ll have to start hunting around.
Consider your qualifications when you do. Most places require you to have a good credit score before they’ll consider you. Some lenders are a little more lenient than others, however.
The next thing you need to think about is fees. Some companies will charge you money to process your application. You might also get slapped with a charge if you decide to pay off your loan early.
Types of Home Remodel Loans
When you go to take out a loan, there are a few financing options that the lender will present you with. You’ll need to familiarize yourself with them before you sign on that dotted line.
If you have good credit and you don’t plan for your renovations to cost too much, we recommend taking out a personal loan. They are a little harder to get than the other loan options on this list because you’re not putting anything up for collateral.
Instead, the bank will be looking at your financial assets and credit score. If you don’t meet certain standards, you won’t be able to get the loan.
If you can’t pay back what you take out, your credit score will suffer instead of losing your home. On the upside, if you get approved for one of these loans, you’ll know within a day or so, and they don’t typically take too long to pay back.
We will warn you that personal loan rates can be a bit excessive, but if you know what to look for, you shouldn’t run into too much trouble.
With a cash-out refinance, you’ll talk to your bank to renegotiate the terms of your mortgage. If approved, you’ll be able to take out some of the home equity that you’ve built up to put toward your renovations.
There is a drawback. You’ll recoup the losses for as long as you live in your house. That means this isn’t a good option for you if you plan to sell anytime soon.
Home Equity Loans
Your home equity is a second mortgage that you can use for whatever you want. Many homeowners use it to make renovations. As soon as you take out the loan, it’s time to start building up your equity again by paying on what you owe.
Since you’ll get this money as a single lump sum, it’s a good idea to know how much your project is going to cost ahead of time. This way, you don’t accidently take out more than you need.
Home Equity Line of Credit
If you don’t know how much the project is going to cost or you’re doing your renovations in stages, a home equity line of credit makes the most sense.
Instead of taking out a bunch of money in a single lump sum, you’ll get the cash as you need it for your project. When everything is said and done, you’ll only have to pay back what you took.
If you meet certain requirements, you might be able to get a loan with the Department of Housing and Urban Development. It’s a government-based agency that will help you pay for your renovations with little cost to you.
The qualifications to be eligible for a government loan vary from state to state, but it’s worth looking into. Additionally, if you decide to update your home to be more energy conscious, the government might give you a loan for that as well.
You shouldn’t go crazy if you’re using your credit card to pay for a home improvement project, but it can tackle the small stuff. If you only want to throw a splash of paint on your kitchen cabinets or update your door handles, charge it to the card.
The last loan option you have is a construction loan. These are even more difficult to get than a personal loan. You’ll have to convince the lender that your project is worth the money you’re asking for.
You’ll have to prepare a construction schedule, budget, and renovation plans before the lender will even consider giving you money. You don’t have to have a contractor before applying, but it couldn’t hurt.
If the lender can see the contractor’s qualifications and proof of insurance, they’ll be more willing to work with you. Since you have to go through so much, these loans are better suited for building a house from the ground up, not renovations. That doesn’t mean that you can’t use it for home improvements, though.
Getting Financial Assistance for Home Renovations
Do you want to do some work on your house? It’s hard for most people to come up with the money on their own for something as pricy as home renovations.
That only leaves one alternative. Taking out a loan. There are many options available to you with varying requirements.
Talk to your bank today to get started.
Do you need more help planning your renovation project? Check out the home improvement section of our blog for all the latest tips and tricks.