Getting a Loan for Home Renovations

While you like your home, there are still some steps needed to turn it from "home" to a "dream home." Whether you want to add a second level or winterize a three-season porch, remodeling adds value to your home. If you don't already have the funds for this project, you can finance the remodel with a loan.

Types of Available Loans
  1. Installment Loans. These are traditional loans with set interest rates and repayment periods. They are termed installment loans because the borrower pays them back in installments; usually monthly. Typical installment loans include mortgages, auto and student loans.

  2. Non-Installment Loans. Unlike an installment loan, non-installment loans often have open-ended repayment periods, higher interest rates and variable loan amounts. Typical non-installment loans include payday loans, title loans and credit cards.

Although you can use non-installment loans for home renovations, most experts recommend installment loans because of their lower interest rate, longer repayment periods and reliable terms.

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Which Installment Loan is Best for Home Renovations?

You must first answer a crucial question before you get a loan: do you own the house already?

If you already own the home and want to work on renovations, you would need a remodeling loan. The amount of the loan will cover only the estimated cost of the renovations. This loan can be acquired at most major banks and lending companies.

Then again, you may have your eye on a great "fixer-upper" and want a loan big enough to cover the cost of buying the home, as well as extra funds for renovations. In this case, you would need a purchase-and-renovate loan. Talk to your mortgage bank about adding to the loan for renovations.

First Steps for Your Home Renovation

Before you start talking to your lender, you need to know how much money you require for the renovation project. This way, you'll know exactly how much to ask for.

Contact several contractors for estimates on the renovations. As you talk to contractors, ask them what you may need in addition to their expertise. For instance, a kitchen renovation may need not only new fixtures and appliances but plumbing and electrical contractors as well.

Once you have your estimates, tally the amount you need, and bring this information to your bank or loan company. If all goes well, you'll have enough funds to turn your lackluster house into the dream home that you've always wanted.

What renovations do you need for your home? Will you get a loan to be able to do such renovation? Share your thoughts in the comments box.

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