Looking to remodel your home?
Over the course of the last 15 months, home remodels have been on the rise as we've been home so much more than in the past. Our home, our shelter, the roof over our head has been our safe haven, and having all of the amenities we need at our fingertips equals luxury living. You've had the entire Winter and Spring to ponder what might be your first choice for your Summer project.
Home renovation costs can be pretty overwhelming, but the good news is you don't have to produce the cash out of pocket.
- Have you thought about a built-in pool? A patio extension? A sunroom?
- Are you working remotely now, and an office is your first choice?
Let's talk about the timeline and next steps.
Estimate Your Project Cost
If a new pool is what you have chosen, your first step is to have an onsite consultation with a pool representative. Knowing your zoning laws, deciding on above-ground vs. in-ground, and determining your budget are the first steps.
If a room addition to your home is your top choice, your first step is to meet with an architect to draw up your plans and then meet with a general contractor to work out all of the details.
Whatever your choice is, understanding the different loan types is where we come into play.
First Steps:
Evaluate Your Equity
You can figure out how much equity you have in your home by subtracting the amount you owe to include all liens against the house from the appraised value. This is your home equity.
Understand Your Credit History
Same as when you purchase a home, your credit will be evaluated, and your approval will be affected by your credit score. Income requirements also apply.
Get an Appraisal
We will assist with ordering an appraisal to establish your home's worth.
There are many home improvement loan options, and as your lender, we will go over all of these options to ensure you make the right choice based on your remodeling needs.
Loan Options:
Cash-Out Refinance
You refinance to a new mortgage loan with a bigger balance than what you currently owe. Then you pay off your existing mortgage and keep the remaining cash. The money you receive from a cash-out refinance comes from your home equity. It can be used to fund home improvements, although there are no rules that say cash-out funds must be used for this purpose.
FHA 203(k) Rehab Loan
The FHA 203(k) rehab loan bundles your mortgage and home improvement costs into one loan. With an FHA 203(k) rehab loan, you don't have to apply for two separate loans or pay closing costs twice. Instead, you refinance and pay off your existing mortgage plus the funds for your home improvements at the same time.
FHA 203(k) loans are backed by the government, which means you can have a higher loan to value (less equity) and the ability to apply with less-than-perfect credit.
Conventional Renovation Loan (Homestyle & Choice Renovation)
Allows for a single-close transaction on your home, where the mortgage includes the renovation costs in the financing. A conventional renovation loan is available for second homes and investment properties and allows a pool addition, unlike FHA 203k mortgages.
Home Equity Line of Credit
A home equity line of credit works best for ongoing projects. You could also finance home improvements using a home equity line of credit. A home equity line of credit is best if you are able to pay off the funds used for your renovation within 3 to 5 years, as this is typically an adjustable-rate and shorter-term loan.
It is more flexible per month as you can borrow from it up to a pre-approved limit, pay it back, and borrow from it again. While all of this can seem a bit overwhelming, this is what we do.
Reach out today.
We will be here every step of the way to accomplish all of your remodeling goals!
