Whether you are currently looking at a house for sale that you would like to renovate, or you are a homeowner who is currently looking to improve upon certain elements of their own home, a home renovation loan might be necessary. Home renovation loans can come in handy when large repairs or renovations are just out of reach in terms of your finances. However, you shouldn’t just jump into a home renovation loan without knowing exactly what you are getting into. Home renovations are exciting, but there are several questions you should consider before signing the dotted line on a home renovation loan. These questions and considerations are discussed and explored in extended detail below!
What Type of Renovation Loan Do You Need?
When it comes to renovation loans, there are two standard types: home equity loans and personal loans. A home equity loan will allow you to use your home’s value as collateral, which could allow you to receive a larger loan, whereas a personal loan normally operates off of the credit score of the borrower. Lenders who grant personal loans are often more selective with who they loan money to, and if you are looking to receive a personal loan you will need a great credit score. Either of these two types of home renovation loans can allow you to install those new metal roof tiles or fix that vinyl flooring. However, depending upon your personal financial situation, one of these loans will probably offer more benefits than the other.
How Large of a Renovation Loan Do You Need?
The size of the renovation loan you will need will obviously rely upon the amount of work you wish to complete. If you are looking to get a loan for a home that you can use to make small repairs, you likely won’t need to capitalize upon the largest loan available to you. However, on the other hand, if you are looking to renovate one or more rooms, you may need to take out a hefty loan to make sure you are covered during the whole process. It’s important to remember to only borrow money for renovations that will increase the value of your home. Therefore, later down the road when you sell the home, you can capitalize on all the work you did.
What Renovation Loans Can You Qualify For?
Another important aspect of the loan process to consider is what loans can you actually qualify for. You might have grand hopes of renovating a home bathroom only to find out you are not eligible for such a large loan. Taking a good look at your credit score is a great way to anticipate what size and type of renovation loans you may qualify for. If you are a first time home buyer, you may also qualify for other loans such as first time home buyer loans.
What Are the Alternatives to a Home Renovation Loan?
The last thing you should consider before signing your name on the dotted line is what are the alternatives to a home renovation loan. If you don’t think you will be eligible for either of the two types of home renovation loans, then you might want to consider a line of credit, an energy-efficiency mortgage program, or cash-out refinancing. These options and others will allow you to receive more funds for your renovations in various ways. An equity line of credit will grant you the advantage of being able to take only as much as you need. Therefore, if you just need enough to repair the fiber cement siding of your home, you can do this and then start to pay off the balance without going too much in the red.
As you now know, renovation loans are typically offered as personal loans or home equity loans. These two types of loans can be very helpful, but also very stressful to get involved with. If you are currently looking to take out a renovation loan, you should consider the various questions covered in this article before moving forward. It is okay to take a day or a week to think about your decision. After all, you don’t want to rush into a decision that could result in you being stressed for years in the future. Good luck!
Skylar Ross is a contributor to the Innovative Materials blog. He is a content writer for the construction and home improvement industries with an interest in landscaping, outdoor remodeling, and interior design. Skylar is focused on educating homeowners, contractors, and architects on innovative materials and methods of construction that increase property value, improve sustainability, and create a warm and welcoming ambiance.