Sat. Jan 25th, 2020

Should You Get a Loan to Remodel Your House?

Loan to Remodel Your House

Loan to Remodel Your House

Whether it’s for your own benefit or you intend to put it on the market, upgrading and repairing different areas of a house can make it more appealing and comfortable. You might need to fix up your bathroom with new sinks and tiles,or your kitchen might require new cabinets and an extra window for more light.

The ideal solution is to save money over a certain period for these repairs because remodeling can be costly. If you don’t have any savings, you’re probably considering what many homeowners do – taking out a loan. Before doing that, you need to determine if it’s a wise move.

What to Consider Before Getting House Remodel Financing

1.      Is Your Remodeling Project Necessary?

A remodel is necessary when your house poses imminent danger or is a health hazard. If your tiles are detaching and breaking because the grout has worn off, new tiling is necessary. Detached and broken tiles put the house occupants at risk of tripping or cutting their feet.

A leaking roof is also worth remodeling. The more it leaks, the worse it will get and the more expensive fixing it will be. Termite infestation might mean that you simply need to call in pest control services. It could also mean that you need a complete remodel.

There are other reasons that make remodeling unnecessary. A baby on the way may make you think that buildingan extra room is necessary, but it’s actually not. Home remodeling shows entice homeowners to start on non-essential remodeling projects. The projects on TV make them feel like their home is not good enough. Also, pingkee up with the Joneses is never reason enough to embark on costly remodeling projects.

2.      What is the Potential Return on Investment (ROI)?

The common reason many homeowners give for financing a house upgrade is the return on investment. They believe that the property value will drastically increase. The truth is that some upgrades are a waste of money and will not add to the value while others will return a majority of the investment. A new report has found that smaller remodeling projects with massive aesthetic appeal will bring the biggest payoff.

These projects yield the highest payoffs:

Garage Door Replacement

The 2009 Cost vs. Value report discloses that an aesthetically pleasing garage door is the best investment a homeowner can make for a high return of approximately 97.5% of the cost.

Stone Veneer

Enhancing your home entryway with manufactured stone veneer in place of vinyl siding will attract buyers and fetch you back 95% of the cost.

Kitchen Remodel

A kitchen upgrade creates an enjoyable environment for entertaining guests and cooking tasty meals for friends and family. Kitchen remodels generally involve installing new and more efficient appliances, new sinks and flooring, resurfacing cabinets, etc. Buyers appreciate kitchen upgrades and you’re assured of recovering at least 80% when you sell your home.

A remodel might give you a high ROI but getting back 100% of the cost is a long shot. If you must upgrade, don’t waste time and money on low yielding projects like adding a swimming pool or a master suite. It doesn’t make sense to lose most of what you’ve invested. Real estate professionals can advise you on what buyers in your area are more interested in.

3.      How Long Will You Live in That House?

If you’re going to live in your house for many years to come, you might want to upgrade it for comfort and convenience. However, if you live there too long, the remodel won’t be valuable if you later decide to sell. You will get much less than your investment.

How about if you’ll just be living in the house for a few months or years? An upgrade will benefit you if you’re leveling up to your neighbors. You’ll get more money for it faster even though you may not recoup the total cost.

4.      Is it an Over-Improvement for the Neighborhood?

If you’re surrounded by modest bungalows, why would you upgrade yours to a posh mansion? Over-improving your house is a terrible mistake. It costs a lot of money and your house will not sell. If it does, you’ll not recover much.

5.      Does Your Remodeling Project Have Extra Costs Attached?

Upgrading your house can come with additional costs that you may not have thought about before. A swimming pool comes with long term costs of maintenance, purchasing chemicals, and higher water accounts

A huge lawn will require mowing every week or more. Adding a master suite will increase your electric and water bills. Borrowing for a project that will increase costs will strain you financially and affect other obligations.

6.      Explore Alternative Options

In some cases, moving into a new house is cheaper than the cost of a major upgrade. If you don’t want to move, it’s still possible make minor changes that will make a big difference. Professional home improvement companies can help you achieve your big dream with small tweaks here and there. It’s a cheaper option which you can pay for with cash and still be happy in your new space.

7.      Do You Have Good Credit?

Good credit allows you to obtain a 5000 loan no credit check with with a favorable interest rate. You can also get a credit card with a 0% promotional rate. Poor credit will make getting a loan expensive because of the high interest rates. Even with good credit, check which rates you’re eligible for and calculate the total cost of the loan.

Types of Loans for a House Remodel

Before taking financing for a remodeling project, talk to different lenders and assess all your options. Don’t be in a rush to go for any offer you land on. Ensure that you find the one that’s best for your situation.

You should be able to meet the loan requirements and make your monthly payments comfortably. The types of loan include:

Home Equity Loan

This is a fixed rate loan that the borrower pays back in monthly instalments.

Home Equity Line of Credit

This works like a credit card and requires 20% equity. As long as you don’t borrow beyond your credit limit, you can take whatever amount you need. You pay on the amount you’ve borrowed.

Cash out Refinance

This refinances an already existing mortgage. It’s typically a higher amount than what is currently due. The borrower gets the difference in cash.

Final Verdict

In most cases, remodeling is expensive and time-consuming. We hope the above considerations will guide you towards making the right decision for your project. Make sure you’re remodeling for the right reasons and that it’s cost effective as well.

The best option is to save money and self-finance your upgrade. However, if it’s an urgent issue like a health hazard or potential danger, a loan is the way to go. Take your time finding the right one and ask as many questions as you need to for clarity.

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