Have you been living in a home where conditions are slightly lower than bearable? We understand how tiring and confusing this must be. We all want to come home to a place of comfort, convenience, and serenity, and a lot of worn-out homes just don’t make the grade. Perhaps that’s why people were open to spending an average of $1,500 to improve their homes between 2017-2019 and about $6,438 on average during the wake of the 2020 Coronavirus Pandemic.
While 75% of homeowners, who engaged in home renovations, were financially prepared, the rest of the 25% were backed by home renovation loans. With this ratio, can we say that home renovation loans are not worth it because few people resorted to them? Let’s find out.
Popular Types of Home Renovation Loans
Thousands of companies offer home renovation loans and thousands of more types of renovation loan policies — including loans for people who have bad credit or have no credit history. Here are some of the most popular types of renovation loans:
Fannie Mae HomeStyle Loan
This is a renovation loan that you could avail of upon purchasing the house with a Fannie Mae Mortgage Loan. Types of improvements that qualify for the HomeStyle Loan are improvements required by the appraiser. It covers both structural and cosmetic works.
USDA Home Repair Loan
This loan is for homes in select rural areas. It covers plumbing, electrical, foundation, siding, roofing, windows, new appliances, and other upgrades that support the health and safety of its inhabitants.
FHA 203(K) Loans
This is a government-backed loan that is slightly more expensive than the Fannie Mae HomeStyle Loan. The FHA loan is generally for homebuyers that have low credit scores. You can either avail of a Full Loan or a Streamline Loan (<$35,000).
Jumbo Renovation
This loan is for high-end homes that don’t usually qualify for regular renovation loans. It covers nonstructural renovation works that add value to the house.
General Loans
General loans are what we’d like to call loans that aren’t directly created for renovation works. This includes your credit card, cash-out mortgage refinances, home equity loan, HELOC, and more. Using these types of loans to finance your renovation provides more flexibility because the money isn’t restricted to particular types of home improvement works — you get to decide where to spend it.
What You Didn’t Know About Renovation Loans
Renovations make homes safer and nicer and have the potential to increase their resale value. Yes, you read it right — not all home improvements add value to a home. When the necessary renovations are extensive, it would be best to consult an appraiser to know which repairs to prioritize. This would also ensure that you hit two birds with one stone — make your home safer while increasing its value.
Like all other mortgage and non-mortgage loans, companies will check your income, credit history, assets and liabilities, and more. The only difference is that renovation loans’ interest rates and administrative fees may be higher than mortgage loans because you need to repay them sooner (although there are a few renovation loans that allow you to pay for up to 12 years).
In addition, some companies take weeks to disburse the funds. So if you’re in a hurry to fix your home, it might be best to search for a company that has a good record of releasing the funds fast. Or, you can also go for “general loans”, especially if the total amount needed for the renovation is not that substantial.
The bottom line is, take your time and go through all the details when choosing a renovation loan. You want to make sure that you’ll be able to repay it without putting yourself in more financial distress.
What’s the Alternative?
Once you’ve scoured all the possible renovation loan options and still couldn’t find the right one, you can also consider transferring to a new home. Selling your old house is fast and easy with Spire Property Solutions. At Spire, we don’t always resort to making an offer right away, especially when we know you have other options to explore.
If you really wish to renovate your home, we can help you find a strategy for it. However, if, at the end of the day, you just want to get things over with and not think about how unsafe your house is already, we can craft an offer to buy your home. You don’t have to make a single change to your house when we buy it because we accept houses as they are, no matter the condition.
We always offer a fair price and can close a deal in as fast as 14 days, depending on the availability of documents. At Spire, you can never go wrong with your home. To learn more about our process, call us at (678) 318 1801 or just take a second to leave us with your contact details in the form below.