Financing Your Home Remodel

Understand the options for your home renovations

FINANCING YOUR HOME REMODEL

Taking on a home remodel, whether it is a single room renovation or a whole home transformation, is a huge decision! Ensuring that the project – regardless of scope – makes financial sense is key to enjoying the process. If you start a project on unsteady financial footing, stress quickly takes over and you may find yourself compromising your initial vision. Knowing what your budget is from the start, working with a lender you can trust, and finding a general contractor that is upfront with both you and your lender is critical to successfully completing any remodel project. We sat down with one of our community partners, Beth Prigelmeier at Western State Bank, to learn more about financing options for home remodels.

HOME REMODEL FINANCING

What financing options do I have for remodel projects within my current home?

  • First financing option: If you have built up equity or put down a large down payment upon purchasing your home, a home equity loan can be utilized. Also known as a second mortgage, a line of credit up to 89% of the value of your home is provided. You only advance what you use in this scenario, and you pay interest-only until the end of the project. This interest amount fluctuates based on the amount of money you use from that line of credit. If you come in under or over budget, you have a little wiggle room to accommodate either scenario.
  • Second financing option: Construction loan that goes by the bids, specs, and plans that your general contractor has given you, and then it would be appraised by your lender. It would be appraised as it is finished with a finished value. A small amount of wiggle room, typically 10% over the estimate provided by your general contractor, is also provided.

CHOOSING A LENDER FOR YOUR HOME REMODEL

What should I keep in mind when searching for a lender to work with for my home renovation?

  • Find a lender that will advise you, and listen to everything you are looking for in your home remodel.
  • Make sure your lender is easy to communicate with and that you get along well with the individual you ultimately choose to work with.
  • Find someone that walks you through the loan estimate in a way that makes sense, and that can clearly define and explain any fees associated with the loan.

NEW-TO-YOU HOME REMODEL FINANCING

What financing options do I have for a house that I just purchased that needs home renovation projects?

  • The best option for a scenario where you are purchasing a home and   then immediately making significant changes to it would be to treat the entire project – including the purchase of the home – as a Construction Loan.
  • Using the bids, specs, and plans would provide a broader budget picture and allow you to know what you can afford as you work with your general contractor on your home’s remodel.

HOME REMODEL FINANCING CONCLUSION

What are some general words of wisdom for those searching for home renovation financing?

  • If you want to refinance a new to you home to take advantage of the second mortgage option, you would need to live in the home for 6 months before refinancing
  • General words of wisdom for seeking home remodel financing include:
        1. Know your budget!
        2. Be upfront with your lender!
        3. Find a communicative lender!
        4. Have your lender and general contractor cooperate!

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