The use of a house renovation loan to fund your improvements?

Sick of the same old, same old? Wish to reap more out of your greatest financial commitment? These are just some of the reasons homeowners renovate. Here’s another big one — many homeowners are motivated to renovate simply because they would rather remain in a house they previously own instead of moving to a new home.

The Houzz & Home Overview of U.S. Renovation in 2020, published in 2020, provides for us a much better idea of what’s happening home based renovation, with takeaway facts like:

  • New homebuyers may renovate. Over a quarter of renovations originate from recent housing purchases.
  • Sellers are curious about renovation too. Exterior remodels are the most widely used projects for soon-to-be sellers hoping to improve curb appeal.
  • Few are counting the cost. About one-third of homeowners start their remodeling project having a affordable price in your mind. Nearly one-third of owners also exceed your budget they set.
  • Millennial homeowners are simply as likely to remodel as Seniors. The important thing difference? Millennials spend merely a third around the older age ranges on their own renovations.

Time is money. Getting prequalified fast could make it easier to enter into your dream home whenever you find it.

Ready to renovate? Determine the 'why' before the 'how'

The opportunity is there, and thus is the margin for error. The Houzz & Home Overview reveals a glaring problem: Most owners either aren’t setting or stay with a budget. Understanding what you’re taking on, whether it’s a brand new mortgage, a brand new renovation project, or both, can help you create a smarter financial decision. This is exactly why we asked Dmitri Kara of and the featured Google+ community Home & Love, with more than 300,000 followers, to speak to us concerning the most typical reasons he sees for home renovation.

As he explains in his exclusive interview with Cornerstone Home Lending, Inc., small remodels can generally be divided into three categories:

  1. Improvements to standard of living.

These would be the small remodels we do for the close and near future, Kara says. “This appears like the brand new second-floor toilet you need to mount to ease morning traffic, the flat-pack kitchen remodel which will fascinate all your guests, or even the floor heating within the living room for all those cold winter Sundays. The list goes on.”

Why remodel? Improving quality of life is extremely subjective and different to every individual home. As well as for some, comfort doesn't have price. “That said, if you ever plan on moving and selling, you should try to keep the balance in check,” Kara advises.

  1. Improvements to increase resale value.

Usually, should you add living area to your home, Kara says, its value will likely increase. But in some locations where costs are lower, the return can sometimes be of negative value. Kara explains, “When adding more living space, remember that if you stick to the specific regulations, an extension or even a simple loft may become a bedroom, which instantly sends your home into a totally new league.”

Lest you pour all your savings into funding remodels to increase your property value, Kara reminds us of his golden rule: Don't outgrow your street. “A buyer searching for a $400,000 property wouldn't want to live in a $200,000 street,” he explains.

Why remodel? Spending is up for bathroom and kitchen remodels, the Houzz & Home Overview of U.S. Renovation confirms. Kara adds the bathroom and kitchen would be the two most frequently used rooms in almost any house. “If you nail those down without breaking the bank,” he states, “You could make a great profit after a re-sell.”

More money, less problems? Homeowners, it might be time for you to refinance your mortgage.*

  1. Improvements for rentals.

If you are a landlord or about to become one, domestic repairs, small carpentry, and routine improvements are normal handyman tasks you'll understand. “Not all tenants treat their home with similar respect they would when they owned it,” Kara says. “Furthermore, tenancies usually choose a couple of years tops. Which makes renters less connected to the property and fewer inclined to care for its wellbeing. To put it bluntly, rentals go through heavy domestic maintenance costs.”

Why remodel? Should you like a landlord plan to make any money at all, your improvements have to be created to last. For that bigger upgrades, Kara recommends purchasing professional contractor services – to make sure quality and stop costly accidents. “The same applies to new appliances, equipment, tools, and furniture,” he says.

How to invest in a home renovation: 6 options for homeowners

You’ve figured out your “why” for that project. The next thing is to create a financial budget based on your individual finances (consulting with your financial advisor and loan officer, when needed), and then, let the funding begin.

Consider one of six ways to pay for your home remodeling project:

1. Cash.

If you’ve first got it, use it. For those with the available funds, this alternative will be the most apparent. If you are planning to save and purchase each upgrade, try tackling one small project at a time. Using a charge card is also a possibility for any smaller home reno, as long as you're able to pay that quantity back before it accrues high interest.

2. Mortgage refinance.

Refinancing your mortgage could give you use of a lesser mortgage interest rate that yields a lower payment per month. That’s why we always recommend an annual check-in together with your loan officer to maintain your mortgage — as well as your finances — in optimal shape. Lowering your monthly mortgage payment with a refinance could release extra cash you could use to cover your house renovation, as described in option number 1. Your loan officer may also recommend a cash-out refinance that will allow you to access a number of your home’s equity at as much as 80 percent of their value.

Talking to your loan officer should feel like talking to a buddy. Click the link to learn more about the premise experience.

3. Home rehabilitation loan.

This option works if you’re a homebuyer who intends to renovate once you obtain the secrets of your brand-new house. Renovation lending programs such as the FHA 203(K) Limited or Full or FNMA Homestyle (Conventional) loans allow you to borrow extra money, within one home loan, to finance a house purchase and its improvements. A house renovation loan can also be used to invest in repairs. Each renovation loan product has different contingencies, maximum repair amounts, and timelines that may be explained in detail by your loan officer. The FHA 203(K) Limited, for example, requires home repairs to begin within 15 days and also to be finished within six months of closing.

4. Home equity credit line (HELOC).

A home equity line of credit is removed like a revolving credit line, using your home’s value as collateral. Much like a credit card, a HELOC provides a credit line which you can use to fund larger repairs or consolidate other loan debts. The interest on the home equity line of credit is normally tax-deductible and lower than other loan types. And like other mortgage loans, a HELOC could leave your home in danger if payments are delayed or stopped altogether.

5. Home equity loan.

A home loan is different from a home equity line of credit for the reason that it’s another mortgage loan used to access your home’s equity, without needing to refinance. A home equity loan may be a better option than the usual refinance for those who have a large amount of equity available to you. The main difference from a home loan and a cash-out refinance is that the former creates a second mortgage on your home, as the latter converts your overall mortgage into another mortgage with various and much more competitive terms. You might choose not to refinance the first mortgage if it already includes a a low interest rate rate. Within this scenario, taking out another mortgage will work better.

6. Construction loan.

This final option can work well if you’re a house owner offering the large guns — rebuilding a portion of your property or carrying out a total flip. Construction loans are not as easy to find and have tighter requirements. Generally, a construction loan is granted as a short-term loan, and money is released in phases before the renovation is completed.

Moving may not be desirable or feasible at this time, making it a prime time to renovate. You might also choose to renovate if you want to placed on the finishing touches and turn your new house right into a home. Homeowners of age groups take a tough look at the possibility to increase their homes' values through carefully-selected upgrades. Some news outlets have gone so far as to describe this renewed reno boom as “using a house being an ATM.” If home values are rising where you live, you may be in a position to access even more cash to renovate when you refinance or remove another mortgage.

For the mortgage questions only a loan officer can answer, we’re always open to help. Get in contact to discover how to fund your home renovation in a way that benefits your family — with the big-picture objective of increasing your property value.