Some of us look to improve and upgrade our homes but do not have the necessary funds to do so. This is where home renovation loans come in. These loans are specifically for you to borrow money for improving or repairing your home. Unlike many loans, home renovation loans calculate the estimated after-renovation value to determine how much you can borrow. In this blog post, we will explore the different types of home renovation loans and give you a brief understanding of how it works. Continue reading to find out what home renovation loans are.
Different Types of Home Renovation Loans
If you are looking to expand your options, you need to understand the different types of home renovation loans. Each has its own feature and benefits that can suit your needs and goals. Here are some of the most common types of home renovation loans:
- Home Equity Loans: This is a type of consumer loan that enables you to borrow money against the equity of your home which can be in the form of a lump-sum payment. Usually, home equity loans have fixed interest rates and you can repay through terms that can last from five to 30 years. In case you fail to make payments, the lender can take possession of your property.
- Home Equity Lines of Credit (HELOCs): Similar to Home Equity loans, HELOCs function more like a credit card which means you don’t get a lump sum. Instead, you get access to a line of credit and can draw funds needed for your home renovation.
- Personal loans: A quicker loan to acquire without the need for an appraisal or a home equity evaluation. However, personal loans are unsecured and usually have higher interest rates compared to HELOCs and home equity loans.
- Government Loans: Federal Housing Administration’s 203k loan and the VA renovation loan are government-insured programs that are designed to aid you to finance any home renovation projects. Compared to conventional loans, government loans are more flexible when it comes to eligibility and can be utilized to fund a wide range of home renovation projects.
Evaluating the costs and benefits of each type of home renovation loan is vital. You must consider the interest rate, repayment terms, and other fees that are needed with each loan. Have a clear understanding of your planned renovation project and ensure to only borrow what you deem necessary. These different types of home renovation loans differ and may not be suitable for everyone. Therefore, you must also consider your financial situation, needs, and goals before taking out home renovation loans.
It’s exciting to plan on upgrading your home and making it cozier for your well-being. At the same time, by doing home renovation projects, you are also increasing your home’s value. However, home renovations can be overwhelmingly expensive and not all of us have the funds to pursue them. This is why applying for a home renovation loan can be a valuable tool for you if want to achieve your home upgrades. If you have any more questions about home renovation loans, don’t hesitate to contact us at Mann Mortgage!