There are many reasons why you may want to remodel your home. Perhaps you are looking to sell, or maybe you feel you want that spark of inspiration back, or maybe there are some serious problems with the home, and it is about time you sorted it out before it gets any worse. In many cases, home remodeling means you need home financing, but luckily there are many ways you can secure this. To help you decide on how best to proceed, we have come up with this guide:
Should you Secure Home Financing?
This really depends on how much you need the upgrade, your financial situation, and the size of your home renovation projects. If saving is not a feasible option, then a loan is a perfectly reasonable way to go. As long as you are able to easily make the monthly repayments on the size project you want, the process does not last too long, and that the project will definitely increase the value of your home, it is a sound investment.
Home remodel or home repair loan
These are unsecured personal loans which banks, credit unions, and some online lenders will offer you. Unsecured means you are not offering up any kind of collateral, like your house; however, the interests rates will be higher as a result. Your credit score will affect the interest rate and if you can qualify for this type of loan. If all is well, then the money is quickly paid into your account, sometimes in just one day. The timeline for repayment is generally quite short, and the total sum you can borrow may also be lower than other loan types. You will most likely have fees to pay if you miss any payments. This is a good loan for someone with a poor credit history and a small home project to finance.
Home equity line of credit (HELOC)
This is a secured loan, your house is collateral, but this means you have lower interest rates. It is rather flexible as you have the opportunity to take out what you need when you need it, up to the maximum of your borrowing limit. The interest rate is variable, reflecting market conditions, but your house could be foreclosed on if you do not make a payment. After you apply, it can take 2 to 4 weeks to receive your loan. You will need at least 15% to 20% equity in your home. This is a good choice for ongoing home projects which do not have a set budget. Anyone with a good credit score and home equity could benefit from this loan.
Home equity loan
This is sometimes called a second mortgage, with your home as collateral. You will receive a lump sum you pay off with a fixed monthly fee over a period of a few years. The interest rate is fixed, so market fluctuations are not an issue here. It is a great choice for people who know exactly what their project will cost. It usually takes between 2 and 6 weeks to receive the funds.