Different Types of Loan For House Renovation
Home renovations can increase resale value, improve your living environment, or simply make it more enjoyable to live in your home. However, before you begin the remodeling process, it’s important to understand how these projects can impact your financial situation, especially if you plan to finance the renovation through a loan. In this article, we’ll explore the different types of loan for house renovation and how to determine which one is right for you.
Can you borrow more for home improvements?
Many lenders offer streamlined processes for home improvement loans, making it easier to secure financing for renovations. Additionally, some loan providers allow borrowers with lower credit scores to secure home renovation loans than traditional mortgages or home equity loans. However, be aware that a home renovation loan will add a new debt obligation to your current finances. If you’re not sure if you can handle the additional monthly loan payment, consult with a trusted loan advisor for guidance tailored to your specific needs and financial capabilities.
Affordability and credit score requirements
Unlike personal loans, home renovation loans are based on future home value rather than your existing home value. Consequently, they can be more affordable than traditional home equity loans and offer higher borrowing limits than traditional first mortgages. However, the credit score minimum for a renovation loan is higher than for a typical home equity loan or cash-out refinance.
FHA 203k renovation loans are available to help homeowners purchase and renovate fixer-upper homes. However, this type of home renovation loan requires a larger down payment than other loan options and typically has a higher interest rate and mortgage insurance requirement.