Home renovations are costly but can make your home more appealing and comfortable. If your home needs repairs, the only thing stopping you is funding, most of the time. However, home loans for renovations can help!
There are six benefits to getting a home renovation loan that you’ll want to consider. We’re going to break down all of the details below, so make sure to keep reading.
1. Increases Your Home’s Equity
First, the best reason to get a home loan renovation is to increase your home’s equity. If you have to do a cash out refinance, you’ll have access to more money later.
Equity is very important in a home. Essentially, equity is the difference between how much value your home has and what you still owe. For instance, if you have a house worth $250,000 and have $200,000 left to pay back, you have $50,000 in equity.
Equity is a great resource to have in emergencies. However, you can also use it for other expenses, like college. Having equity in your home has plenty of benefits, and a renovation loan can greatly increase it.
2. Limited Closing Costs
Renovation loans also limit closing costs to an extent- which helps when you need to secure funding on a tighter budget. Since the renovation loan combines with your home mortgage, you shouldn’t have as many other fees to deal with.
The FHA203(k) housing loan is a very common option for renovations. The closing costs tend to fall between 3% and 6% of the purchase price. You can find even lower options through HELOC or cash out refinances.
Limiting closing costs when you can is important because they can add up extremely quickly. You can put that money towards your loan or important repairs instead.
3. Customize Your Home as You Please
Next, renovation loans give you the freedom to customize your home. If you bought a fixer-upper, you could completely change its design- making it much more worthwhile. You can add new rooms or completely remodel them with one of these loans.
Plus, the money doesn’t just have to go inside the house. You can spend the loan on working on the outside as well. So, if you want to increase the curb appeal or undertake a huge landscaping project, you can! You’ll be happy to know that the repairs can even apply to installing swimming pools and similar items.
Overall, many families appreciate being able to customize their homes. You can create your dream home since there aren’t limits to what you can use the renovation loan on.
4. Combine Mortgage and Renovation Monthly Costs
As briefly mentioned above, renovation loans can combine with your current mortgage. That way, you won’t have to worry about another payment occurring later in the month. Since these two expenses merge, you’ll only have to make a single payment each month.
You might have to make a downpayment depending on where you get the loan from. However, that helps lower the amount you’ll need to spend each month as you pay it back- so the more you can put down at first, the better your finances in the long run.
Combining your mortgage and renovation bills is very helpful to many people. You’re sure to appreciate not having to remember to make another payment. Plus, you can automatically have the bill come out each month, so you don’t have to worry about forgetting. You can even borrow up to 95% of the value of your home, although you’ll need to pay PMI or MIP mortgage insurance.
In short, many lenders will attach your renovation loan with your mortgage. It’s very convenient, most of the time.
5. Access Energy Efficiency Renovations
You can also access energy-efficient renovation loans. Increased energy efficiency means you won’t have to pay as much for utilities. Over time, these renovations will pay for themselves, especially if you plan on living in this home for a long time.
This process goes well beyond simple weatherization. You’ll likely need to have an energy efficiency official rate the status of your current home and give a report to the lender. From there, you can make improvements with the money you get.
You can make improvements to all of the following:
- Heating fixtures
- Cooling fixtures
- Water efficiency
And possibly more! If renovating something can improve your energy efficiency, you will benefit from it. Plus, you can worry less knowing you’re being kind to the environment.
Adding energy efficiency is always worthwhile, so make sure you consider it!
6. Work With Trusted Contractors
Lastly, you’ll have the opportunity to work with trusted contractors. Certain renovation lenders, like the FHA203(k) loan, require you to work with certain contractors. However, these will all be trusted professionals in the area.
These contractors will likely already know what paperwork to fill out for the lender, especially if they’re popular in the area. They’re also sure to know what requirements to meet for building codes and other important information.
You’ll want to talk with your potential renovation lender about who the best contractors are near you. Many lenders have recommendations that they can make!
Overall, it’s best that you only work with trusted contractors. They can address safety issues and make your home as stunning as possible. Always do your research into contractors and get a quote before you commit to having them start working on your home project. That way, you know you’ll get great results.
Love Your Home!
It’s much easier for you to love your home when it’s in the best possible condition. You can renovate it however you want, allowing you to change the style. You can build your dream home when you get one of these renovation loans.
To summarize, there are plenty of reasons for you to get a renovation loan. You can build equity, access limited closing costs, and more. If you’re interested, you’ll want to start researching potential lenders as soon as today.