Upgrading your home is an investment that can definitely pay off. But before it can start paying off, you’ve got to find a way to pay for the projects you have in mind. Getting a home remodeling loan or any type of loan can be stressful and confusing. You may have lots of questions. Get the answers to the most common ones so you can start taking steps toward that big home project.
What Kind of Loan Should I Get?
There are many different types of loans, and various banking institutions and mortgage companies offer their own options. Various types of refinance and home equity loans will be available to you, including line-of-credit equity loans. Weigh the pros and cons of each type of loan and look at the hard numbers, such as the interest rate, the monthly payment, and the amount of time you have to pay the loan off. Be realistic about what you can handle financially and set a number you can afford before you start looking at loans.
Can I Complete My Home Remodeling without Taking Out a Loan?
Before taking out a loan, consider a more do-it-yourself approach to financing your home remodeling project. Depending on how big your project is and how good your credit may be, it could be possible to finance it with credit cards. If you have a low-interest rate, this can be very doable. Using credit cards and paying off the balance is an excellent way to improve your credit. So if you handle things well, you can remodel your home and build up your credit simultaneously.
Can I Use My Loan However I Want?
Some types of loans actually have restrictions on them. You don't necessarily have carte blanche to use your money however you like, odd as that may be. Home equity loans and home mortgages, however, can almost always be used for renovations and home repairs of all kinds. Double-check with your lending institution to make sure you can use your loan for the projects you have in mind.
How Much Interest Will I Pay?
The interest you pay on a home equity loan will typically be close to fair market value for the property. However, this can vary, and your credit score will always be a factor when you're getting a loan. Some home equity loans are fixed-rate, which means the rate will not change while you’re paying the loan off. This may be the best option for you, particularly if you have a less than stellar credit history.
Getting a loan when you have property, however, is very doable. Your property has value, and you can almost always use it to secure some type of loan, even if it means refinancing the property and adding more payments to your mortgage.
It is in your best interest to get your credit score as high as possible before looking to get any type of loan. This can give you many more options, and it will prevent you from paying high-interest rates.
Where Else Can I Get a Loan?
There are actually some surprising sources of income for home remodelers out there. If you can, find a way to take advantage of a wide variety of government programs that provide funds for home improvement. Various county and city governments offer home improvement programs. Look into these programs, and you may qualify for an interest-free loan. There is a lot of red tape and paperwork involved, as with any government program. Still, you can get much lower interest rates through these programs than any traditional lending institution.
However, make sure you read all the information and meet all the requirements. Several projects do not qualify for home improvement programs. Swimming pools, hot tubs, decks, and vanity or luxury projects will not qualify.