Home renovations, while useful for adding curb appeal to your home, can get very expensive. If you’re thinking about making home improvements, you’ll need to decide how to finance the cost. If you don’t have enough in your savings, you can consider to finance your home improvement plans with a renovation loan.
Here’s some information on what a renovation loan entails and the benefits that come along with it.
4 Benefits to Renovation Loans
Some lenders offer home improvement or renovation loans, which is very similar to a personal loan. These loans are meant to provide additional financing so that you can afford to renovate your house.
Limits Closing Costs
A great benefit of this loan is that it combines the funds needed for the renovation with the home mortgage, which is great for buyers because it will limit the closing costs, since one loan will fund both needs.
Increases Equity and Home Value Over Time
Along with that, you are able to borrow against the property value after the improvements to the property. With a renovation loan you are able to increase your home value and curb appeal while also building equity in your home from the start.
If you purchase a fixer-upper, it could not only save you money when putting a mortgage on a home, but there are very little limitations on the types of renovations you can make. From big projects like room additions and kitchen remodels to smaller projects like paint or landscaping – the choice is yours.
Doesn’t Require Collateral
An additional benefit to a renovation loan is that it doesn’t require collateral, so the equity of your home won’t be taken into consideration by your lender. This means that your lender can’t foreclose your home if you default on your loan.
If you choose to go with a renovation loan, it’s a good idea to identify parts of your home that need to be upgraded and to create a detailed plan to show your lender. Does the bathroom need to be remodeled? Does your basement need to be finished? Do you want to add a patio to your backyard? Do you want to add a swimming pool? Figure out what home renovations are a priority for you.
Is a Renovation Loan Right For You?
Deciding on whether a renovation loan is right for you will really will depend on your financial situation and what you want to accomplish for renovations.
Using a renovation loan could help you borrow more than your home would initially appraise for before adding the value of the improvements, which is not the case for any other loan type!
It all comes down to meeting with your loan officer, finding the right loan program, and determining how much funding you may qualify for.