Your Best Home Renovation Loan
The home renovation and rehabilitation market are now worth more than $450 billion per year. From funding fixer-uppers to finalizing plans to perfect their dream home, homeowners across the DC, Maryland, and Virginia area more willing than ever to take out a renovation loan or renovate using credit cards. When it comes to financing a home renovation, there are now multiple options on the market to help homeowners find their best fit, including numerous types of home rehab loans allowing them to personalize how they spend.
Home renovation loans
Home renovations can help you turn your current house into your Home For Life. A remodel or adding a new addition can solve persistent problems impacting your quality of life, and address key concerns before you put your home up for sale. Home renovation loans offer a firm financial foundation for this endeavor, making it possible to fund key projects without dipping into retirement or other savings accounts.
While there’s no time limit on obtaining a loan — you can apply for rehab loans immediately after purchasing a new property or decades into homeownership — the amount of money you can borrow depends on multiple factors including the market value of your home, your existing income and your current financial circumstances including any other outstanding loans or credit card debt.
It’s also worth noting that just because you can take out a substantial renovation loan, doesn’t mean you should. Always consider your plan for payback and the potential for unexpected circumstances to derail financial plans before moving ahead with substantial renovations.
Types of home renovation loans
1. Personal loans
If you’d prefer not to link your loan with the value of your home, personal loans are a solid option. While the amount offered by your financial institution or a private lender will take into account the value of your home, personal loans borrow against the strength of your finances as a whole, providing the on-hand cash you need to complete key reno projects.
2. Home equity loans
A home equity loan uses the existing value — or equity — which builds up as you pay your mortgage down. For example, if your home’s market value is $400,000 and you have $300,000 left to pay on your mortgage, you have $100,000 worth of equity. Banks will typically let you borrow up to 80% of this value — $80,000 in our example — to fund renovation projects.
3. Home equity line of credit (HELOC)
HELOC solutions also make use of the equity in your home, but unlike a home equity loan, they’re not disbursed as a lump sum. Instead, you’re able to draw funds from this line of credit multiple times, meaning you only need to pay interest on the portion of your HELOC in use. Most HELOCs come with a 10-year draw period and a 20-year repayment period.
4. Refinance your mortgage
In a typical mortgage refinance, you apply for a new mortgage on your current home at a lower interest rate, saving you money each month and reducing your interest. In a cash-out refinance, you use the equity in your home to apply for a new, larger mortgage that gives you access to a large pool of cash. Just like a HELOC or home equity loan, you can refinance for up to 80% of the equity in your home.
5. Credit cards
Credit cards offer an easy route to rehab financing — simply purchase what you need on existing credit accounts rather than applying for new loans or mortgages. This is a great option for smaller projects or if you’ve got a solid repayment plan in mind. It does pose the risk of maxing out your cards and leaving no room for other purchases.
6. Government loans
One government loan is the FHA 203(k) loan, which lets you borrow both the cost of a fixer-upper and necessary renovations, then separates the renovation funds into an escrow account for paying contractors directly. The FHA Title 1 loan, meanwhile, requires you to own your home for at least 90 days and lets you use funds to make your house more livable or efficient.
7. Savings
If you’d prefer to pass on loans entirely, use current savings to fund your fixer-upper. This is a great option if you have enough money to fully cover the cost of a renovation already in your bank account, and you’d like to avoid the potential problems that come with putting your home up as collateral or borrowing money from the government.
The final word
If you’re ready to take on a home renovation, reach out to SVA Construction Corp | Design Remodel Build and we’ll help you through the many options available to you as you consider a renovation or rehab loan.
How to get started?
We encourage you to research, ask your friends and family and noodle a bit over how you would enhance your home to truly make it “Your Home For Life”. Then call SVA Construction Corp |Design Remodel Build. We’ve been helping homeowners just like yourself in the DMV for over 40 years with creative design and premium quality construction.
Please contact us or call us at the numbers below.
Maryland: (301) 444-4663
Virginia: (703) 832-8159
Washington, DC: (202) 792-7320