The Ins and Outs of Home Renovation Loans: What You Need to Know Before You Renovate Your Edmonton Home
While credit cards and personal lines of credit can be used to finance your home renovation project, there are better options available that can save you hundreds, if not thousands, of dollars over the long term. Before you begin work on your property, here are a few other types of home renovation loans to consider.
Refinancing your mortgage allows you to take advantage of lower interest rates than and longer terms than you would have with personal loans, lines of credit, and other types of home renovation loans. This type of financing allows you to borrow up to 80 percent of the appraised value of your home (minus any balance owing on your mortgage), although you may need to pay closing costs and appraisal fees.
Home Equity Loans and HELOCs
These types of home renovation loans use the equity that you've built up in your property as collateral for the financing. Home equity loans and HELOCs generally offer preferred interest rates, making this type of financing a more economical option than personal loans and personal lines of credit. As with mortgage refinancing, appraisal fees and closing costs may apply.
Financing Improvements at Time of Purchase
Rather than applying for separate home renovation loans, many people purchasing a new home choose to add the estimated home improvement costs directly onto their mortgage. These types of home renovation loans generally require a 5 percent down payment, but they allow you to borrow up to 95 percent of the home's estimated value after improvements. If you're purchasing a home that requires major renovations -- such as upgraded features, window replacements, or roof repair -- financing the improvements at the time of closing may be the most economical option for getting the work done.
As you can see from the list above, there are several types of home renovation loans available that can help you complete necessary improvements on your property while enjoying lower interest rates than you would obtain to with personal loans and credit cards. Contact one of our lending specialists today to discuss which of these home renovation loans is right for you.