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Did you know that around 61% of homeowners have done home renovations since 3/1/2020? If you are ready for a change in your own home and are wondering how to get a home renovation loan, to help cover those expenses, you are in the right place.
We have put together this home renovation loan guide to share how most homeowners go about raising the money they need. Read on to learn more.
Refinancing
One option when looking for a home renovation loan is to refinance your mortgage. Refinancing means that you will receive a new loan in place of the original mortgage loan you took out.
Secured Loans
This is one of the most common types of loans used for home renovations. A secured loan is backed by collateral just in case you default on the payments.
Homeowners will typically take out a home equity loan where they borrow up to 85% of the home’s current equity. These loans have a fixed interest rate, and the loan is backed by your home.
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Unsecured Loans
These are also commonly used loans for house renovations because they do not require you to put up any collateral to receive your money. All the bank requires is a signature on their contract where you agree to their fees, and interest rates.
When taking out an unsecured loan you will typically need a higher credit score and usually, these loans have a higher interest rate than a secured loan because you are not putting up collateral, which puts the lender at a higher risk of you not paying them back.
Government Loans
When you have poor credit, this might be a perfect option for you because these loans are insured by the government. A common government loan used for renovations is a Title I loan. This loan is insured by the Federal Housing Administration (FHA).
To qualify for a Title I loan, the renovations have to be a necessity, or they have to improve the function of the house. This means that you can’t apply for this loan if you are simply just tired of how your house looks.
There is also a Property Assessed Clean Energy Programs (PACE) loan available. This specific loan can only be used if you are making any energy-efficient updates.
Loan From a Construction Company
There are companies out there offering services to repair houses. One way to borrow money from a construction company or even a home builder is to draw up a project proposal.
Both parties will have to agree to work together in making the repairs where you pay them back according to their terms.
Now You Know How to Get a Home Renovation Loan
Now that you learned the ins and outs of how to get a home renovation loan, you can start making moves for your own loan.
Follow our home renovation loan tips above and make your renovation project possible. Feel free to keep browsing our design section for some inspiration for your remodel project.
