We hear this quite often. As a builder, one of the things we do to make our client’s lives easier is to help guide them in finding appropriate financing for their Main Line renovation projects.
Most people tend to think that their home renovations need to be paid out-of-pocket and so unless they have the funds available, they will generally pursue the typical avenues to secure financing.
Some of the more traditional methods you could use to finance your remodel include:
- Line of credit
- An add-on to your mortgage
- Mortgage refinancing
- Personal loan
- Credit cards
- Personal savings
- Selling off investments or assets
- Cashing in retirement funds
If borrowing is necessary, you might consider a home equity loan from a broker, take out a second mortgage or a personal loan. However, in our experience, financing in these ways can be expensive and create more headaches on top of the renovation stress.
Ultimately, the best-case-scenario would entail taking on the least amount of additional debt – or no additional debt at all, but depending on the circumstances, this might not always be possible.
Financing Options For Your Remodel
During our time in business, we have worked with a wide range of financial institutions that include conventional lenders, like banks and credit unions, and alternative lenders, such as private lenders and niche financing specialists.
Most lenders look at a range of variables to come up with the amount you will be able to borrow. In the case of banks, they will look at the equity in your home (before the improvements) as well as what you still owe on your mortgage. The amount that’s left over can then be borrowed up to 80 percent. Some lenders will give you 100 percent, but your rates will climb after the 80 percent mark, commensurate with the increase in risk.
All in all, banks and home equity loans can be expensive and prohibitive. And, they don’t typically take into account what the value of the home is going to be once the work is complete, which can reduce the amount you are eligible to borrow. If you are doing your remodel with the intention of selling the home, this could be a significant barrier to completing the work as you envision it. You certainly don’t want to limit yourself as to what you can afford to do, especially if you know what kind of value it’s going to deliver in the end.
In the end, the goal is to get the result you want without breaking your budget. To this end, we will work closely with you to ensure you have accurate plans, budgets, and schedules to show your lender, and we are always happy to back you up with any other documentation you might need.
Renovation Financing: A New Way To Fund Your Remodel
Recently, we discovered a new approach that allows homeowners to borrow for their remodeling projects – not from a bank, but from a company that specializes in renovation financing. This unique financial product allows you to borrow against the future value of the home; in other words, what it will be worth once the renovation is complete.
The benefits of a renovation home equity loan are:
- The loan is based on what your home will be worth after the renovation, meaning you can borrow more – sometimes significantly more.
- You won’t necessarily have to refinance your mortgage.
- You will have access to lower rates and fees.
Depending on your financing needs, renovation home equity loans could be a good option for you. RenoFi.com, for instance, is a renovation financing specialist. Working with them—as opposed to working with a bank—gives you the benefit of partnering with a lender who understands exactly what you want to do and wants to make it easier for you to accomplish it, eliminating a lot of regulatory hoops and sundry aggravation.
In the end, you really want to do what’s best for you. Ideally, if you can complete your renovation without having to go into more debt to do so, that’s the best choice. But if you need to borrow, it’s certainly worth looking at renovation financing as an alternative to dealing directly with the bank.
Are you getting ready for a remodel or renovation to your Main Line home? We would love to hear about it! Schedule a conversation today and let’s talk about how we can make it happen.