Renovation Tips for your home
Financing Your Renovation
You may need to borrow some or all of the money needed for your renovation project. Depending on the value of your home and the terms of your current mortgage, you have a couple of options to consider:
Using The Equity You Have: If the difference between the current value of your home and the balance remaining on your mortgage is enough to pay for your project, you may be able to obtain a home equity credit line. These loans will provide you with the money you need to pay for your project. Many banks offer these loans with no closing costs. You may also consider refinancing the entire house. You can then take the extra money available from the new loan to pay for your renovation.
When You Don't Have Enough Equity: If the current value of your house is not high enough to cover the costs of the renovation, then you may be able to obtain a loan for the renovation based on the value of your house after the work is complete. If you choose to get a Renovation Loan, the bank will pay off your existing mortgage and distribute the money for the renovation during the project. You will then have one new loan for your home. This type of loan is very advisable for projects over 100K. The bank will prepare a post appraisal based on plans and specifications that we will prepare for you. They generally loan up to 80% of that post appraised value and by going through this process you get a solid value placed on your home so that you know how much it will be worth after renovations.
Which Loan Is Best? This depends on the interest rate and term of your existing mortgage. If you current loan has a high interest rate, then refinancing may be appropriate. You should consider how much the closing costs will be, the new interest rate, and the term of the loan. If your current loan has a low interest rate you may be better off taking out a second mortgage and keeping your existing 1st mortgage.
If You Need Assistance: To determine the best type of loan for you, consider asking your banker for advice. You will find that banks specialize in different types of loans, and not every bank will be able to provide you with the right loan for your particular situation. John Rogers Renovations is approved contractor for Wells Fargo and we have found them to be very competitive and knowledgeable as well as the process is relatively simple.