“Why do you need a renovation loan?”
Financing is a common problem many people face when it comes to renovating areas in their homes that desperately need a revamp. They settle living with mouldy walls, leaking pipes, stained walls, and other issues, which can put people’s life at risk.
You don’t have to sacrifice your family’s well-being when it comes to renovating the parts of your home that need fixing. Thankfully, there is a cost-manageable way to fix your home, and that is by getting a renovation loan.
Different Types of Renovation Loans
If you’re willing to get a loan, you can choose one of the following ways to loan types to finance your renovation.
FHA 203(k) Loan
The FHA 203(k) loan is a government program.
There are two types of FHA 203(k) loans: limited and standard. The limited is for minor repairs, while the standard is for major repairs. The standard renovation loan has a higher borrowing limit, typically at $5,000.
Before you can qualify for this renovation loan, you need to meet certain conditions. This includes having a good reason for taking out the loan, such as fixing critical health and safety issues in your home. You’ll also need to have a credit score of at least 500. You will need to have a good credit score and no foreclosure in the past three years.
The downpayment for a renovation loan can range from 3.5% to 10%, depending on your credit score, and this loan may require you to work with a contractor.
If you don’t have enough money to spend on your renovation but have enough to refinance your mortgage, it may be the best way to finance the renovation.
You can have a higher borrowing limit than a personal loan when you refinance your mortgage, and it typically doesn’t require you to work with a contractor.
You can also finance your renovation by redrawing from your home equity.
This means that if you’ve refinanced your mortgage in the past, you may be able to get a higher borrowing limit for your renovation.
What’s good about personal loans is that some lenders allow homeowners to borrow up to $50,000.
There are two types of personal loans: secured and unsecured. Secured personal loans are cheaper because the interest rates are lower. To get a secured personal loan, you need to provide collateral, such as your car or home.
Unsecured personal loans don’t require collateral, but the interest rates are typically higher.
Other Ways to Finance Your Home Renovation
If getting a renovation loan from institutions is out of the question, the following are some other ways you can finance your renovation without having cash on hand.
Sell what you don’t need in the house.
This is a great way to get some cash for your renovation whilst also doing a spring clean. You can sell furniture, appliances, and other belongings that you no longer need or use in the house.
Take out a personal loan from friends or family members.
Another way to get money for your renovation is by taking out a personal loan from friends or family members. This type of loan doesn’t have to be paid back right away, so it can help you finance your renovation without having to pay a high-interest rate. Most of the time, family and friends are willing to give you a loan with zero interest.
Why Is It Crucial to Hire a Licensed Builder?
When looking for a contractor to help with your renovation, you must choose licensed and insured. A licensed builder eliminates the possibility of damaging your property, and you can expect professional, high-quality work.
A poor job by an unlicensed contractor may cause more problems, which might require you to spend more and can bury you in debt.
Also, if you want to apply for a 203K loan, working with a contractor is one of the requirements to ensure the quality and accomplishment of the renovation.
Do you need a licensed contractor to work with you? Contact MKJ Projects today!