Renovating a house can be a difficult process for a number of reasons. You’ve got to organize your projects, find the right professionals to work with, and make sure that your finances are in order.
The financial end of things is often the trickiest thing to handle. Many people just take their home renovation budget out of pocket and wait to get returns when they sell the home. That said, you have other options.
We’re going to talk about getting a home renovation loan today. We’ll look at the benefits of these loans, giving you some things to think about as you consider how you’re going to fund your next home improvement project.
So, let’s take a look at the advantage of using a home improvement loan.
1. Multiple Options
The first thing to note about these loans is that they aren’t always specific loans to use for home improvement. A “home improvement” loan can be any sum of money that you borrow in an effort to improve the home.
That means you can explore any option for getting funds to support your renovations. So long as the loan doesn’t have any specific conditions attached to it, you’re free to use it however you like.
The general idea is that you don’t take money out-of-pocket to fund your renovations, because it might be some time before you recoup that investment. With a loan, you’re given the ability to pay the money back in increments.
That luxury comes with the cost of interest, but it’s still better than ruining your short-term finances.
That said, there are loans that are made specifically for home renovation. A home renovation loan with Plenti, for example, might be a better fit for your situation because it’s fine-tuned to apply to homeowners doing this kind of work.
2. Mortgage Inclusion
Another factor to think about is that you can combine a home improvement loan with the loan you take out for the cost of the home. This is an option to use in instances where you’re buying a home that you know will need repairs.
Instead of taking out loans for the home as well as the repairs separately, you can work all of these things into one. One benefit of that combination is that you can use the home renovation loan to cover the closing costs associated with buying a home.
These costs can vary, and you might not know what they’re going to be right up until you wind up buying the house. So, having a little cushion in place that allows you to ease your mind can be a good thing.
Plus, you can get started on the renovations right away and plan for contractors and other professionals to come before you actually move in. If you have the loan situated before you even get the key, you might feel a lot more comfortable planning.
Read more: The Benefits of FHA Mortgages in 2021
3. Protection Against Price Changes
You can’t just go in and order specific projects that will cost specific amounts when it comes to home renovation. Things are a little more specific to the situation and require quotes, labor, and varying amounts of time to complete.
There might be some fixed rates on particular projects in housing developments or neighborhoods where each unit is roughly the same. That said, those aren’t the houses that people tend to renovate.
In most cases, the houses are older and even more unique with every passing year. So, the result is that things tend to cost a little bit more than you expect them to be.
Even if you get a quote, there’s no telling whether or not the price will match that number. Those of you on a tight budget might be unable to pay more than you’re quoted.
When the contractor says that something’s changed, and they’ll need more time and money to complete something, you might have to call it quits and wind up with a half-renovated home. A renovation loan gives you the cushion you need to allow those price changes.
4. Fast Repayment Options
Most loans don’t provide a way for you to repay them in a short amount of time.
Home renovation loans, on the other hand, are ones that you might not have to pay for very long. Once you complete the projects on your home, the value of your house might be significantly higher.
If you choose your renovations well, the return on investment will be high enough to outweigh the renovation loan by a significant amount. When all is said and done, you can refinance your home and get the full value of your investment back in the form of cash.
You can do whatever you want with that money, but one option is to pay back your loan and be done with it. You’ll have a nicer home, some cash-in-hand, and the loan will be covered without accruing very much interest at all.
5. No Collateral
Another beautiful thing about most home renovation loans is that they aren’t taken out against the value of anything else you own. In most cases, that means the value of your house.
If you default on your mortgage, for example, you run the risk of losing your home. With a home renovation loan, your home isn’t in jeopardy if you default on those loans.
That said, the loan officer might look at the practicality of your renovation plan to see if the returns are worth their investment. A good plan along with the estimate of added value is always a good thing to bring along to your first meeting.
You might not be approved for the loan if it doesn’t look like you’ll be able to make payments, but you won’t have too severe a risk if you are approved and your finances take a downturn.
6. Maintain Standard of Living
Those who take home renovation costs out of their own pockets might destroy their savings. They could also lower their standard of living while the renovations are happening and payments are due.
In some cases, a homeowner could pay more than $100,000 to renovate a home. It’s not always that drastic, but it can be. What was once a great and comfortable life becomes a situation that is very different.
A loan to cover home upgrades can prevent you from falling into such a situation.
7. Refinancing Is an Option
If you’re not looking to enter into a financial agreement, there’s always the option to refinance. When you get your home value back, you can use it to improve the quality of the home.
The nice thing is that the money is already yours, there’s no interest in it, and it can be used for whatever you want. A lot of people refinance and put the money back into the home to make it more valuable.
This is still a sort of “improvement loan,” but you’re just the lender and you’re lending back to yourself.
8. Flexible Repayment Options
Most home renovation loans come with a variety of repayment options. Because any personal loan could be used for home renovations, too, there are a number of different approaches you could take.
This is a welcome change from most project-specific loans that corner you into specific terms and deals. You can explore your options, find the lowest rates, and wind up with a sum of money that is repayable in whatever way you find easiest.
9. You’ll Finish Projects
Finally, it’s important to note that a renovation loan is an excellent way to ensure that you’ll get the projects done. Renovating isn’t a sure bet in any case.
It’s very possible to lose funds, stop in the middle, and wait a number of years until you’re in a financial position to start back up. Nobody wants to live in a house that’s somewhere in between finished and unfinished.
These loans are an assurance that you’ll be able to afford the process the whole way through. You can pay your contractors, afford the little odds and ends that come your way, and have the money to support yourself while you’re going through the process.
A big part of the reason that people fail to complete renovations is the fact that they still have to pay for their personal bills and obligations. When you’re pulling from your own limited bank account, the balance becomes very difficult to manage.
So, setting yourself up with a good loan that takes care of all the little odds and ends is a big reassurance for you. At the end of the day, the important thing is that your life is improved by the renovation process, not hindered.
Want to Learn More About Getting a Renovation Loan
Getting a renovation loan might be the best solution for your budget challenges. There’s a lot more to learn and explore, though. We’re here to help you with the information you need.
Explore our site for more ideas on getting the finances for your renovation project, improving your home, and coming out with a great return on your investment.