A loan for home renovation is a way to finance the repair or upgrade of your home. The lending landscape for home improvement loans is diverse, with options from traditional banks to online lenders and credit unions. Each lender offers different interest rates, loan terms and eligibility criteria. To get the best loan for your renovation, it’s important to explore multiple lenders and prequalify before making any commitments.
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Boosts home value: Home improvements that add functionality or beauty can increase your home’s resale value and make it more attractive to potential buyers. However, it’s important to ensure that the projects you select are cost-effective and will yield a reasonable return on investment (ROI).
Streamlined application process: Some lenders offer streamlined renovation loan applications compared to other types of mortgage financing like home equity loans or cash-out refinances. Some also offer a fixed-rate loan with monthly payments to help you budget for the expense over time.
Loan requirements: The qualification rules for renovation loans vary by lender, but typically include credit score and income verification. The lender may also require that you use a licensed contractor for the work and provide a renovation plan to approve your loan.
Many loan programs like the Fannie Mae HomeStyle Renovation and Freddie Mac’s CHOICEReno eXpress allow homeowners to roll in the purchase price of their new home into the renovation loan, which can save on upfront costs. However, these programs have specific rules about the minimum purchase price and maximum loan amounts and may require a higher credit score than other renovation loan options.