When it comes time to renovate your home, the cost of renovations can seem daunting. If you have a renovation loan in mind, good news: You can get money to fund your project. However, many banks won’t give you a loan for home renovations because they view it as a risky investment with little collateral or equity in the property. That doesn’t mean you can’t borrow money for home renovations. There are numerous ways to secure financing if you plan on staying in your home post-renovation and have equity in your property as well as a steady income stream. Borrowing money for a home improvement blog is doable with the right lender and financial situation. Let’s explore different options…
Assessing Your Renovation Needs
Before you start looking for a loan, you need to understand why you’re borrowing money for home renovations. Your renovation needs will determine which types of loans you qualify for and how much you can expect to borrow. Some project types, like general repairs, will be cheaper than others, such as home additions. When assessing your renovation needs, consider the following costs:
– Permits and design fees.
– Materials.
– Labour.
– Other costs associated with the project.
Home Equity Loans
Also known as a home equity line of credit (HELOC), a home equity loan allows you to borrow money against the equity in your home. You make payments by drawing from your line of credit as needed. If you’re approved for a home equity loan, you can borrow up to the amount of equity you have in your home.
If you’re using the money for renovations on a primary residence, you’re likely to get approved for a home equity loan. Interest rates for home equity loans are lower than most other loan types, making them ideal for large renovation projects. Home equity loans are riskier than other loan types as they depend on the value of your home increasing. If your home value drops, you may be stuck with a large debt.
Home Improvement Loans
Home improvement loans are loans that are secured by a second mortgage on your home. Like traditional home equity loans, home improvement loans allow you to borrow money against your home’s value. However, home improvement loans are typically smaller in size and have lower interest rates. Home improvement loans are good if you need a small amount of money and have equity in your home. However, like home equity loans, you’ll have to repay the loan with interest. You can get a home improvement loan from a bank or a credit union.
Borrowing From Family or Friends
If you have good relationships with family or friends, borrowing against a personal loan or home equity line of credit can be an option. However, borrowing from family or friends can be risky. If you fall behind on payments, you’ll damage your relationship. If you can’t repay the loan, you could end up owing a lot of money. Home equity loans are risky for friends and family. If your home value decreases, you’ll owe more money. To avoid this, make sure you put the money into a trust that your friend or family member is named as the beneficiary.
Loan Options Through Renovation Companies
Some renovation companies will give you a loan to help you fund your project. This option is best for renovations that are likely to happen as a bathroom or kitchen remodel. You’ll have to pay interest on the loan, but the loan amount can be based on the final cost of your project. When looking to borrow money through a renovation company, find a reputable company with a good reputation. Reputable companies will provide you with a detailed breakdown of costs and help you find the best options for your renovation project.
