When you own your home, you also own the right to improve it. But as any homeowner will tell you, renovating or upgrading your property can be an expensive proposition. Depending on the scope and cost of your project, home improvements can strain your bank account and take up a significant chunk of your monthly budget. However, if you plan and research financing options, homeownership doesn’t have to stand in the way of your dream renovation. You just need the right advice. Given their often hefty upfront costs, financing home improvements is not as simple as clicking a few buttons on your favorite online lender’s website. But with the right information about what kinds of loans are available, how much you can expect to receive, the documentation you need and lenders that best suit your needs, the financing home improvement blog is not so complicated after all. Follow these 5 tips to learn more:
Know Your Options
Home equity loans: A home equity loan is a type of financing that allows you to borrow against the equity in your home. Lenders will allow you to take out a percentage of the current value of your home that you can use for any purpose with no fixed monthly payments. The interest rate on a home equity loan will vary based on the current interest rate environment and your credit score. Home equity lines of credit: A home equity line of credit (HELOC) is a revolving line of credit that is usually used to pay for home improvements.
You draw on a HELOC as you need it, but you pay it back through monthly payments over the life of the credit line. The amount you can borrow might be limited and is usually determined by a percentage of the equity in your home. Credit cards: The best financing option for home improvements is a credit card. With a credit card, you can use the funds you’ve already earned and set aside for home improvements. If you are approved for a credit card with a low-interest rate and 0% introductory APR, you can make your payment on the card over a longer period without paying much interest.
Determine The Value Of Your Home
A lender is going to ask you to provide proof of the value of your home before they approve you for a home improvement loan. While they can use an appraisal to determine the home’s current value, they may ask you to provide documentation that your home has appreciated over time as well. You can prove the value of your home by showing the lender documents like purchase and sales records, tax records, improvement records and utility bills. You can also show lenders comparable home sales data for your neighbourhood.
Find Out How Much You Can Borrow
Before you even start looking at improvement projects, you need to know how much you can borrow. Your lender will be able to help you determine this amount by reviewing your credit history, monthly income, debt-to-income ratio, payment history and current cash reserves. It’s also important that you understand your long-term financial goals so you know how much you can borrow without taking on too much debt. If you want to renovate your entire home but don’t have the necessary equity, you can consider a home equity line of credit.
Be Ready To Commit
Even if you have excellent credit and can afford to make sizeable monthly payments, lenders may hesitate to loan you money. Before you apply for a home improvement loan, you have to be ready to commit to the terms and conditions of your loan. For example, if you apply for a 15-year fixed-rate mortgage and are approved, you have to commit to making payments under that mortgage for 15 years. If you try to negotiate a shorter repayment period, you’ll get declined.
Find The Best Lender For You
As you begin your search for financing, it’s important to shop around for the best loan terms and conditions. Keep in mind that the best terms and conditions might not be available from your current lender. You can begin your search online, but you don’t want to stop there. You want to talk to a variety of lenders, shop for the best rates and terms and ask plenty of questions about their loan programs. You should also check your credit score before you begin shopping for a loan. You can usually get a free credit report from one of the three major credit bureaus once every year. If your credit score is low, you might want to look into ways to improve it before you apply for a loan.
