So maybe you’ve been staring at your backyard, and picture a pool, hot tub and cabana. Maybe your kitchen needs to lose the linoleum floors and dated countertops and cabinets. Or maybe you want the master suite bathroom of your dreams. These are pricy dreams, and most people can’t write a check to pay for them out-of-pocket. If you are looking for a home renovation loan, here are some things to consider.
There are different types of home improvement loans, and the type of loan you choose may depend on the scale of the project. If your project is relatively small, a short-term loan makes sense. If it is more of a major undertaking, you might consider using your home’s equity to secure a loan.
Home Equity Loans
A home equity loan is a second mortgage on your home, with your home being used as collateral. Just like your first mortgage, you pay back on the loan in monthly installments for an agreed-upon time. Every situation is unique, but lenders will typically loan you 85% of your home’s value. It is a judgment call, with lenders taking into account your income and credit history. Home equity loans usually have a higher interest rate than your mortgage. Banks will start with the prime rate and adjust your interest based on credit history, your income and how much you have left to pay on your home. At LoanLeaders of America, we work hard to find the best interest rate for your unique renovation project. There are also fees associated with a loan, such as:
Application or origination fee
Notary signing services
Title search and insurance
Credit report fee
Flood elevation certificate
Benefits of a Home Equity Loan
Lower interest rates than credit cards
Potential for a larger loan amount vs. a personal loan
Tax deduction for capital improvements
Drawbacks to Home Equity Loans
A second mortgage reduces your home’s equity
You run the risk of foreclosure for failure to repay the loan
You may pay more interest long-term, because home equity loans can run for 30 years
When selling your home, both mortgages need to be paid off at closing
A personal loan is simply an unsecured loan that is not guaranteed by your home. The interest rate you receive is generally determined by your credit history, and you can usually borrow between $1,000 and $50,000. The payback time can range from two to five years. Like home equity loans, personal loans have an APR that includes interest and fees, which is why LoanLeaders can help you find the best fit for your project. With a personal loan, there are origination fees, as well as prepayment or late fees.
Benefits of Personal Loans
No equity is required, which may be a benefit if you don’t have much equity in your home
You can borrow smaller amounts than a home equity loan
Drawbacks of Personal Loans
Higher interest rates
Shorter time to repay the loan, usually 2-5 years
Our best advice it to plan ahead and apply early for a home improvement loan before ‘demo day’ occurs. The paperwork and timing of approving a loan may take up to a month, so it is wise to start early. Make sure you know how much money you will need for your project, and pad it a bit in case unforeseen problems occur. At LoanLeaders of America, we can assist you in getting prequalified so you’ll have a realistic understanding of what you will be paying each month for the renovation.
Contact us at LoanLeaders of America so we can help you find the best solution for that new pool, kitchen or bath!
Shutterstock: Andy Dean Photography
Let me start by saying thank you, thank you Rob Davidson of Loan Leaders for helping me with my Loan for a second time. That’s right, for the second time. Rob’s attention to detail and market knowledge played a crucial role in determining when exactly to apply and lock interest rates. Rob will take the time to explain every step in the process and ensure you obtain the best Loan possible for you unique set of circumstances. His professionalism, attitude and kindness shines through in everything he does. You simply can’t go wrong with Rob Davidson at the Helm.
Many Thanks Rob, it was a pleasure to work with you once again.Brian L. from Riverside, CA
Extremely helpful and professional throughout the whole home buying process. Danny Schultz was available for anything we needed and treated every request with the urgency and efficiency you look for when dealing with the stressful task of buying a house. I have already recommended Loanleaders of America to my friends and family and will definitely continue too in the future. Thank you so much to Danny and the whole team at Loanleaders for making us feel like we were in good hands throughout every step of the way! If there was an option for more than 5 stars, this team deserves it!Jake M. from Chino, CA
First of all, thank you so much for the wonderful experience you provided during my home refinance. Andrew and Gina provided excellent service and communication. I will certainly be referring them and LoanLeaders to anyone I know who is looking for a loan. Thanks again!
Ann’ette P. from Woodland, WA
I would like to start off by saying that it was a pleasure to work with Zachary. He exemplifies what is to be considerate of the customer. He was always on his A game in helping in anyway that he could. He made himself available at all times and was very knowledgeable as well. Thanks for having him as a part of your team. He is truly an asset!Barrin H. from Homestead, FL
Jason was phenomenal! He worked with us through our issues, and helped us quickly with every roadblock we ran into. I definitely would recommend this mortgage company to anyone I know.Adam M from Elkins Park, PA
Rob has assisted my husband, myself and our families with many, many refinances over the past 7 years. He is very knowledgeable, responsive and goes the extra mile to find the right solution for each client. I would recommend him without hesitation!R Marienlun from Martinez, CA
Jeff did a great job for us with no problems closed on time was very helpful with all our questions. Even a couple years after the transaction was completed he is still there to help answer any questions that may come up.M Reimbold from Yorba Linda, CA