Home renovation can be exhausting physically and financially, but home renovations are inevitable, especially when your home is already old or you want to sell it at a higher price. There’s the best renovation loan if you are struggling financially and need that renovation. You have to look and analyze what would be best for you.
In applying for a home renovation loan, you need to consider; the cost you want to borrow, how much you can borrow and how difficult it is to borrow.
There are Five Renovation Loans to choose from:
- Home Equity Loan is a secured loan for a fixed amount of money. But it would help if you had to have at least 20% home equity first. If you do not have home equity, it will be impossible to borrow through a home equity loan.
- Home Equity Line of Credit (HELOC)- HELOC is just like a Home equity loan; the only difference is you will be given a credit limit instead of a fixed amount of money. You can borrow money for as much as possible if it is within your credit limit. The good thing is that your interest rate is based on the money you borrow, not your credit limit.
- Mortgage Refinance- replacing your current mortgage with a new one with a higher mortgage balance. Refinance lets you borrow at low mortgage refinance rates. It is limited to a maximum refinanced mortgage of 80% of your home value.
- Personal loans- it has a more accessible and quicker application process and are best for those who need to pay renovation expenses but don’t have enough equity in their home to get a secured loan. The downside is that you have to pay higher interest rates, which will be based on your circumstance. For example, low credit score.
- Credit cards have high-interest rates and are only ideal if you can pay for them quickly. You can consider credit card loans if you only need a couple of thousand for your renovation.
When renovating your home, always keep a particular goal in mind. Control your finances wisely and try to save money in any way. HELOCs and second mortgages give you access to a large amount of money which can tempt you to overspend and go over your budget. That is why you must have discipline when it comes to your finances.
In addition to that:
Before considering getting a home improvement mortgage Canada, you should know the pros and cons of applying for a loan. Yes, we don’t have a choice if we really need a renovation, yet we need more finances. But it would be good to see what you expect when applying for a loan.
The Pros of Getting a Renovation Loan:
- Opportunity to restore an old home- this is one of the primary reasons we renovate our homes. To restore our old homes. Old homes have charms that homes these days don’t.
- Lower cost- your interest rate is usually lower, and you will generally have a more extended period of time to repay the loan since it’s your first time taking out a mortgage for home renovation.
- Larger tax deduction- for the first mortgage for the home and renovation, your interest, including the cost for renovation, will be tax deductible.
The Cons, on the other hand, are:
- Not all banks offer special “Renovation loan” programs- this can limit your choices of lenders.
- More preparation is usually required- You’ll need to be able to show the bank or mortgage lender that the home will have a high enough value when it’s finished to be worth the money.
- It takes longer to qualify for the loan- it takes longer than the usual mortgage because there are many more people involved in home renovation loans.
With all things considered, a home renovation loan is not a bad thing. You need to be responsible enough to maintain your payments. Think wisely, and don’t make a decision in haste. Evaluate your situation, finances, and support to smoothly get through the renovation loan.
Home renovation is re-modeling a house for a different reason for every individual. It may be your porch, you want to change your old roof, or you wish to get basement renovation financing. It’s all up to you, and getting a loan for your home renovation is a responsibility that should not be taken lightly.
Be responsible in your payments to maintain your good credit report. Also, your home is in the collateral; if you don’t want to lose your home, you should pay your bills on time and not miss any payments. The goal here is to save money while you finish your mortgage.