How do Remodel Loans Work

We have seen an increase in customers who are researching remodeling their whole house or building an addition versus selling and relocating.  These homeowners generally meet with a realtor to determine how much they think they can get for their property, research the local market for housing inventory, and then speak with a contractor to determine how much it would cost to renovate their home.  We believe we can thank HGTV’s “Love it or List it” television program for the recent surge in inquiries.

The folks who decide they want to stay and renovate inevitably ask “how do remodel loans work?”.  For that reason, we are offering you some information on the different types of remodel loans and who offers them.

Home Equity Line of Credit (HELOC)

The amount you are approved for is directly related to the amount of equity you have in your home (how much of the property you own).  The amount you own is equal to the difference between the fair market value of the home and the principle balance of all mortgage loans, which means an appraisal will need to take place to determine how much equity you can pull out.   Find out more about HELOC loans!

Home Renovation Loan

For these types of loans, homeowners are allowed to borrow money determined by what the home’s value will be after the renovation is completed.  For these types of loans, the home needs to be owner-occupied, and it must be your primary residence.  In most situations you can be approved with as low as a 620 credit score.

Learn more about Home Renovation Mortgage Loans!

Same as Cash Loans

These loans are offered by various lenders and the term lengths run from 3 months to 18 months, generally speaking.  Most lenders have a maximum lending amount (Typically $30,000 – $50,000 depending on the lender.)  They also have minimums lending amounts, which we have seen as low as $1,000.

Reduced Interest Loans

The interest rates vary as much as the terms, we have seen them anywhere from 2.99% up to 6.99% with term lengths ranging from 5 years to 12 years.  Most lenders have a maximum lending amount (Typically $30,000 – $50,000 depending on the lender.)  They also have minimums lending amounts, which we have seen as low as $1,000.

Zero Interest Loans

We have seen these loans range from 12 months all the way up to 84 months depending on the lender.  Most lenders have a maximum lending amount (Typically $30,000 – $50,000 depending on the lender.)  They also have minimums lending amounts, which we have seen as low as $1,000.

Hero Program

As a government-funded program, we never know how long this program will last.  Contractors who offer Hero financing must be pre-approved contractors.

HERO is a PACE (Property Assessed Clean Energy) program that provides financing for energy-efficient and renewable energy products. In the state of California, HERO provides these same financing options for water-saving and drought-resistant products.

Learn more about Hero Program Financing!

Classic Home Improvements offers each of the above financing options.  

There are many contracting companies who have partnerships with lending and mortgage companies so be sure to ask what their home renovation financing options are.  Each contractor will have detailed information about the financing options they have available to offer you.  Due to the many different lenders, each contracting company may have a variety of different options for you to review.  In addition, many contractors offer multiple financing solutions which means you can combine two or more lending options to meet your needs.

 

 

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