Top 3 Ways to Pay for Home Renovations: Pros & Cons Are Discussed
Home improvement is an incredible option for people who want to make some changes to their homes. Changing some basic features in your present house can give it a brand-new appearance without the hassle of a complete transition. However, if you have made your mind for remodeling your present house, what to do next?
Let’s check out the top financing options for home renovations alongside their pros and cons:
1. Home Equity Line of Credit
The Home Equity Line of Credit is an easy and less expensive choice when it comes to renovating your house. Instead of basing the lending amount on the home’s value after the renovation project has been finished, our lending officers will either use a tax bill or a new appraisal value for deciding your home’s present market value.
- Upfront costs of Home Equity Loan are lower than those of other loans.
- Repayment terms of Home Equity Loan are flexible.
- Borrowing against your home’s equity helps you improve your home’s value.
- Its interest rate is slightly higher than a traditional first mortgage loan.
2. Renovation Loan
You approach the mortgage lender for renovation loan. With convenient underwriting and loan servicing utilizing the finances, this options can be an incredible funding option for larger projects. For this lending, loan officers consider your home’s value after the major renovation is completed. The procedure of borrowing a renovation loan is the same as borrowing a loan for constructing a new house, incorporating the requirement of a contract, specifications, and plans from a trained contractor. For some borrowers, a renovation loan may provide a nominal down payment need and a one-time-close feature with ultimate funding incorporated. It also provides interest-only payments amid construction followed by basic monthly payments upon project completion.
- You can get a purchase and renovation loan simultaneously.
- This process can be inexpensive.
- This is tax-deductible.
- There are lots of paperwork and limitations included.
- A lender needs to approve everything.
Refinancing is the best way to pay for home renovations if you are doing a costly, big remodel. Since you want to get the lowest possible rate of interest on the fund you require for the project, you should opt for this option. With a refinancing, you can save a lot of money on your mortgage when rates of interest drop.
- Generally, the interest is tax-deductible.
- It leaves you with some cash.
- Your old loan gets replaced with a new one.
- You might require purchasing mortgage insurance that increases monthly payment more.
Considering financing options, we help you start your journey toward home renovation. At Drew Mortgage, as an approved mortgage lender, our loan officers strive to help you find the best mortgage option for your renovation requirements!
Contact us at Drew Mortgage if you want to start your remodeling project.