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This Old House - Do-it-Yourself

The Do’s and Don’ts When Looking for a Home Improvement Loan

Written by Posted On Tuesday, 31 October 2017 12:31

Most homeowners prefer staying in their homes and making additions or renovations instead of spending thousands of dollars on a new home. The current unpredictable economy and the high cost of living are two of the main factors that inform this decision.

In the recent past, one had to save for a renovation project for years or months. Thankfully, there are financial institutions that have stepped in to assist homeowners to carry out renovation projects more conveniently by offering a home improvement loan.

It is imperative to consider some factors before applying for this kind of financing to avoid any challenges down the road. Here are the dos and don’ts when looking for a home improvement loan.

Dos

Estimate the Total Cost of the Project

Consult a professional home renovation company to get a clear perspective of the total cost of the renovation project. Doing so will help you to know the amount of money that you should ask for from the bank.

Get Your Paperwork in Order

Virtually all financial institutions will require you to submit some documents to help them determine your ability to repay the loan within the set timeframe. You may be requested to provide tax returns for the last three years and proof of your current income to demonstrate cash flow. There are also some institutions that require home improvement loan applicants to fill a personal financial statement that provides details of all liabilities and assets.

Contact the financial institution support team in advance to get information about all the documents that you will be required to submit for your loan application to be successful.

Determine the Value of your Home as is, and After the Renovation

The financial institution will carry out an appraisal to determine the collateral value. Estimating the value of your home as it and after the renovation helps to keep the difference between the lender’s assessment and the home’s worth low.

Find the Right Bank

Take the time to compare and contrast all the lenders or financial institutions in your list before making your final decision. Find out their respective level of experience in assisting other homeowners to carry out renovation projects. More importantly, compare the interest rates as well as the terms and conditions that are associated with the loan to avoid any surprises down the road.

Most of the lenders have customer consultants that you can interact with before signing the documents. However, if the lender does not offer consultation services, feel free to contact a reputable financial expert in your locality to make an informed decision.

Have a Repayment Plan

Just like any other construction project, it is essential to have the end in mind. When you complete renovating your home, how will you repay the loan? If you prefer a long-term mortgage, it is recommended to plan for that ahead to have a smooth transition from short-term financing to long-term repayment.

Don’ts

Do not start the Renovation Project without Good Partners

You will need a team of professionals on your side to ensure that every task is done correctly and as per the industry standards. Interview builders, architects, and other stakeholders before you start spending the money. Otherwise, you might end up paying for low-quality renovation services.

Underestimate Money and Time

In most cases, the total cost and time it takes to complete a renovation project usually exceed the expected timeframe. Based on this fact, it is recommended to have a contingency in terms of the amount of time the renovation will take, the repayment period, and extra dollars to cater for cost overruns.

Locking a Long-Term Loan Rate at the Start of the Project

It is usually costly to lock in a long-term loan rate at the start of the home renovation project. You are better off waiting until 2-3 months to the completion of the project.

Conclusion

It is imperative to consider all factors that directly or indirectly effect on the project before taking a home improvement loan. Have a team of professionals on your side to help you make an informed decision along the way. For example, seek expert advice on the monthly repayment agreement and interest rates to avoid plunging your family into a financial turmoil months after the renovation project.

Concisely, a home improvement loan will help you do repairs immediately instead of having to postpone them until you have saved up enough money. Note that delays can result in secondary complications that may be more expensive to resolve.

Get Hearth will give you professional advice about home improvement loans and other financing options available in the market thereby helping you make smart financial decisions. Feel free to contact the support team for an unbiased, professional, and confidential consultation session.

Listing Additional Info

  • State: California
  • Address: Avlon Park
  • City: Avlon
  • Zipcode: 08242
  • SOLD: no
  • MLS #: 4421536985
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