What Type Of Loan Is Best For Home Improvements?
If you found a property you like, but it needs some serious fixing to become the ideal house you’ve been dreaming of, a renovation loan might be exactly what you need. Not sure how a home improvement loan can help you upgrade your old house, or a newly gained fixer upper to make it more livable?
Don’t worry! In this post we’ll tell you all you need to know about home renovation loans, what is required to qualify for one, and how you can use them for your home improvement project.
But before discussing more about how a renovation loan might help you, let’s first see what a fixer upper property is.
A fixer upper is a piece of real estate needing refurbishment, remodeling, or reconstruction and oftentimes, requiring considerable work to make it comfortable for living. Since these properties are not ready for future owners to move in, they will probably sell for below market value and increase in value after the renovation process.
Buying a new home that’s in urgent need of some TLC can be a shortcut to homeownership. But for many people looking to become first time home buyers, or upgrading to a better living situation, having the money for both the down payment on a mortgage loan, and home repairs is almost impossible. For these types of buyers, along with traditional home equity loans, home equity lines of credit, long term mortgages or personal loans, there are also financing products specially designated for making home renovations and repairs.
How Does A Renovation Loan Work?
A home renovation loan is a financial product, often wrapped into a mortgage, that allows you to finance both the value of your home, and the renovation costs at the same time. With a fixer upper loan you can expand your budget, tackle larger projects simultaneously, and pay off improvements over a longer period of time and at a lower interest rate than other types of financing.
One thing you need to consider though is that these types of home loan options may place limits on what kinds of renovations you can undertake, but also the contractor you are planning to work with. They are mostly recommended when you are looking to cover projects like installing a heating or a cooling system, repairing the roof, removing mold or upgrading to a new kitchen. If you’re simply looking to make minor changes or borrowing money, a renovation loan may not make the most financial sense.
And if you are wondering how much you can borrow through a renovation loan, the total amount of each loan depends on your home’s appraisal value, renovation plans, your credit report, employment history and existing debts.
Is a Renovation Loan a Good Idea?
A renovation loan can be a great idea once you understand that this type of a loan for home can often require extra consultations, inspections and home appraisals. In this current financial and economic climate, lenders will want to ensure that you are able to repay your loan. And for a significant amount and a low-interest rate, most banks and credit unions will want to make sure that you also have a good credit score, a stable income and a clean financial report. Unless you don’t qualify with all the above criteria, your loan application will most probably be rejected.
But if you are looking for a faster process and an easy approval which doesn’t depend on your income or credit score, alternative mortgage lenders can offer you a competitive loan, well-suited to your needs and based mostly on the equity in your home.
If you’re planning to buy a fixer upper or renovate your current home, the best solution for you would be to work with a home mortgage consultant who has a good experience working with renovation loans. A trusted mortgage broker in BC can guide you through the lending process and compare the financial packages of key alternative lenders in the Canadian mortgage market. After thoroughly analyzing all the financial packages, your broker can help you choose a home renovation loan with monthly payments you can afford, and which is best suited for your particular situation.
What’s Next?
With different lending criteria, interest rates and charges imposed by our top private lenders in Vancouver, we will negotiate the right mortgage options for you. We work efficiently and quickly on your behalf, understanding that speed is often of the essence and we are with you from start to finish so there’s no need for you to stress with paperwork or delayed timelines.
To find out more about how a renovation loan might benefit you, but also if you are curious to discover which are some of the B-lenders in Canada we work with, and what private mortgage rates they can offer you, don’t hesitate to contact us today!
