If you own a home that needs renovation, there are several ways you can fund the project. One of the best options is to use the cash in your savings. However, this option means you will tie up the money that could be earning interest on other investments. It is therefore important to compare interest rates before deciding on the method to use.
Another way to fund a renovation is to take out a second mortgage to finance the project. Many home flippers don’t have the cash on hand to fund a full renovation themselves. Fortunately, there are lenders out there that specialize in hard money funding for renovation projects. These companies can help you make more money on your property and improve your profit margins.
Before applying for a home renovation loan, it’s important to estimate your total budget for the project. Then, add a buffer to your budget for unexpected costs. For example, a water-damaged subfloor could cost more than expected. This way, you’ll be less likely to overspend on the renovation.
If you have equity in your home, you could consider taking out a home equity loan to finance the project. This type of loan allows you to access 80 per cent of the value of your property to fund your renovation. The amount you’ll need depends on your equity and the amount you need to renovate. For example, if you have equity of $250,000, you could take out a home equity loan for up to $400,000 to complete your renovation.
Another option to fund a renovation is to get a home equity loan or home equity line of credit. While home equity loans allow you to draw against the equity in your home, they are not usually enough to cover the total project cost. In addition, a home equity loan is only suitable for home owners who have been in their home for at least 10 years. However, if you’re a recent home buyer, you should consider a renovation loan.
Alternatively, if you’d like to renovate your home and spread out the cost over a longer period, a construction loan might be a better option. The interest rate on construction loans is significantly lower than that of other types of home loans, and they generally cover the cost of structural work. A construction loan also allows you to borrow up to 90 per cent of your home’s value after the renovation.