Are you interested in updating, renovating, or repairing your living space? Do you long for a kitchen that’s more functional? Could your growing family use more space? Is a tired bathroom in desperate need of a modern touch? Are you interested in adding features that will make your home more livable now or in the future as you age in place? Deciding that your home will benefit from renovations is easy. Figuring out how to finance them is a bit harder. Fortunately, there are a number of loans for home renovation that could do the trick.
Loans for Home Renovation
It’s true. You could opt for a personal loan, open a home equity line of credit, or go for a regular cash-out refinance loan to finance your renovations. However, there’s a reason that savvy remodelers opt for home renovation loans. Actually, there are a few good reasons. As PrimeLending indicates, many loans for home renovation come with some appealing benefits. You can generally borrow both the amount you need to purchase or refinance and the amount needed for your renovations in a single loan. That means that you’ll have only have one loan application, one set of closing costs, and one monthly payment worry about. With fewer hassles holding you back, you’ll be able to get to work on transforming your home into your dream home as soon as you close. Of course, each of these loans have specific requirements, so you’ll need to explore their respective ins and outs and choose the one that best fits your needs.
The EZ “C”onventional Loan
Are you opting for a conventional approach to your financing? EZ “C”onventional renovation loans are designed to handle borrower-requested or appraiser-required renovations for borrrowers who want to use conventional loans. As ValuePenguin explains, the changes must be nonstructural and add value to the residence.
VA Renovation Loan
VA Renovation loans aren’t for everyone, but if you’re eligible for one of these loans, they can be a fantastic solution. As The Mortgage Reports notes, a borrower can finance up to the “as-completed” value of the home. The home must be your primary residence, and you must choose a VA-approved contractor. What about the repairs? The cap for repairs is $50,000, and you aren’t allowed to totally gut the home. The repairs should improve the structure; they shouldn’t be purely aesthetic in nature.
FHA 203K Loans
As NerdWallet reports, an FHA 203K loan offers some real benefits. Its requirements for both the down payment and credit score are pleasantly low. It can also cover your mortgage payment if renovations make your home uninhabitable. However, you are limited to purchasing a primary residence. You’ll also need to use an experienced contractor and pay FHA mortgage insurance. In addition, you’ll have to select which FHA loan to use:
- 203K limited loan. Major structural repairs aren’t eligible for this option. It’s meant for smaller projects with speedy turnarounds. Borrowers can get up to $35,000.
- 203K standard loan. Major structural repairs are eligible. In fact, you can take a home down to its foundations and rebuild it. Renovations must cost at least $5,000 and should improve a home’s functionality or attractiveness. They must be completed by a licensed contractor within six months.
HomeStyle Renovation Loan
Many renovation loans won’t let you add luxury items like swimming pools. As Forbes reports, Fannie Mae’s HomeStyle Renovation Loan is an exception. The rules set for this loan are incredibly flexible. While borrowers can’t completely tear down and rebuild a structure, they can gut and redo its interior, add luxury features, or add permanent landscaping features. You can even add a separate accessory dwelling unit, or guest house. You can also include up to six months of principal, interest, taxes, and insurance to cover your mortgage payment so that you can afford to live elsewhere while the work is being completed.
Whether you’re buying a fixer-upper or transforming a home that you already own, figuring out how to finance renovations can be a little tricky. When you’re ready to learn more about loans for home renovation and the special programs offered by PrimeLending, reach out to PrimeLending Twin Cities. Our team of loan experts will listen to you so that we can identify the loan options that work best for your specific situation and help you find the products that fit your needs. Contact us today to get started.