Creatively finance your home renovation

Walking toward your home, a prospective buyer notices an old, rusty mailbox, lackluster landscaping, and a funky portico design that doesn’t match your home structure.

What do you think they would do? 

You guessed right. The buyer will leave the place and continue their search for a better home. If you want to sell on your terms, your property must have an irresistible appeal. And maximizing the home’s curb appeal will make buyers more eager to sign on the dotted line.

But wait. Isn’t renovation a huge expense? What if you’re already on a mortgage and spending more of your income on home improvement is just…impossible?

As the chances for a house selling quickly increase with good curb appeal, you’ll want to find ways to finance your home’s needed upgrades.

Here are four approaches to quick-turnaround home renovation finance:

1.         Unsecured personal loan

If you don’t want to put up any collateral in order to secure financing, an unsecured personal loan is for you. With a FICO credit score above 720 and an impressive financial history, you can land an unsecured personal loan quickly. If your score is below this, you might run into some roadblocks in the form of outright rejections, lower loan totals or higher interest rates.

Do beware of unsecured loans that come with high interest rates. The loan amount that you receive will be less than secured loans. Think about the Pinterest boards of interior design that you’re longing to recreate in your home before putting it on the market. Perhaps a personal loan isn’t the right path. 

2.         Home Equity Lines of Credit (HELOC)

HELOC is a home equity-based credit line that provides you with ‘revolving’ credit. This means that the loan amount is pre-set, and the interest rate is variable. You can withdraw part of the amount, and the interest is charged only on that part.

To qualify for HELOC, your home equity must be 15% or higher. Though HELOC allows financing flexibility, the tradeoff is higher variable interest rates. Keep this in mind before considering this option. 

3.         Mortgage refinance with a cash-out option

Refinancing your mortgage with a new lender and revised terms can help to finance your home renovation. In this scenario, you’ll clear your first mortgage and get a new one with a cash-out option that you can use for home renovation.

In mortgage refinancing with a cash-out option, the difference between the old and new mortgages is paid in cash.

Compared to a HELOC, a cash-out refinance requires higher home equity (20% and up). It also comes with a fixed interest rate that typically lower than your first mortgage.  

4.         Government loans

You can apply for government loans for home renovation such as the FHA 203(k) mortgage or Fannie Mae HomeStyle Renovation loan.

The FHA 203(k) mortgage refinances your existing mortgage and combines it with home improvement costs. Here, the loan is based on the estimated value of the home after renovation.

The Fannie Mae HomeStyle Renovation loan is similar to FHA 203(k). The key difference is that the FHA mortgage allows you to take up remodeling work by yourself, but with the HomeStyle loan, you must hire a professional consultant.

Make your home irresistible

Now that you’re familiar with the different ways to secure home renovation finances, you can pursue the option that’s best for you. Once you receive funding, you can put it toward all the good stuff: applying new design trends, making tasteful upgrades and timely repairs. It’ll be so irresistible; you might just want to stay put! Instead, let the home buyers come flocking.

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