What to Know Before Taking Out a Home Renovation Loan
Home renovation loan? Renovating your house is a great way to give it a fresh look and add some property value as well. Whether it be a kitchen remodel, new bathroom tiling, or a full-on extension, there are plenty of opportunities to renovate your home however you want. However, if you don’t want to pay the cost all in one lump sum upfront, financing is your next option.
There are a few things you should know before you go searching for a renovation home loan, though. In case you want to finance a home renovation with a loan, let’s go over what you need to know to make the best choice.
- What Type of Loan Do You Want?
The two types of loans you’ll typically use to finance a renovation are a home equity loan and a personal loan. Home equity loans can be easier to obtain because they involve taking out a loan using your home’s equity, rather than just your reputation alone. These loans take longer to get approved though, so be sure to apply at least 6 months in advance just in case the process gets dragged along.
Personal loans are approved more quickly, but require better credit and will come with higher interest rates as well as a shorter repayment schedule. You may be able to secure one with poor credit if your income is high enough, however.
You’ll want to apply for this type of loan one or two months in advance. Personal loans are ideal for smaller projects like certain window casing ideas and other minor renovations.
- What Size Loan Do You Need?
If your credit is good enough, lenders will be more than happy to give you a loan of almost any size. This can work against you, though, if you take out a loan that’s bigger than what you need. The interest will add up and cost you money you didn’t need to spend, so be sure to adequately assess what your expenses will be.
If you want to replace your roof with cedar shake shingles, for instance, be sure to get an accurate quote from your roofer on the cost to replace a cedar shake roof.
- Who’s Offering the Best Deal?
Another potential downside of having exceptional credit is that you’re likely to get offered a loan by the first place you go to. The first offer isn’t always the best one though, so make sure to shop around and inquire at multiple different lending institutions including banks and online lenders.
Say you are considering the cost to replace a garage door, the first bank might qualify you for a personal loan with higher interest rates but another lender might counter that offer with a more reasonable one. Loans can be negotiated too, so let different lenders compete for your business if you’re in a position to do so.
- Consider your Time Frame
If saving money on a home renovation isn’t number one on your priority list, go ahead and opt for the personal loan with higher interest rates. It’s likely to be approved months in advance of a home equity loan. Personal loans are also likely to cover the cost of most renovations unless they’re very large and expensive.
Weigh Your Options to Find the Best Loan for You
If you have good credit, chances are you’ll qualify for loans from different lenders. Remember to take the factors we’ve laid out into consideration and compare loan options. If you play your cards right, you’ll be able to obtain a home renovation loan of perfect size and just in time to complete your project whenever you desire. If you have either good or bad credit, you might consider a home renovation loan by obtaining a 2nd mortgage
Brian Jeffries is the content director for the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.