January 2

Should You Consider a Home Renovation Loan?

Are you thinking of renovating your Charlotte, NC home? Then you should be prepared for the staggering cost. According to Rocket Mortgage, it will cost you about $13,000 to remodel your property. 

If you don't have the money for a home makeover, you should consider getting a home renovation loan. Many types are available, including Fannie Mae, FHA 203(k), and RenoFi. Depending on your loan, you may borrow as much as 80% of the home's future value. 

From broken heaters to adding a new room, a home renovation loan can help you out. That said, it’s best to read the pointers below before you decide to apply for one.


What Is a Home Renovation Loan?

As the name suggests, a home renovation loan is a loan you can use to renovate your Charlotte, NC home. The amount you'll get will depend on your property's after-renovation value. In other words, it depends on how much the value of your home will increase after the remodeling project.

Word to the wise: a home renovation loan is different from a home improvement loan. 

The latter is a type of rebranded and unsecured personal loan. This loan isn't suitable for renovation projects because of the limited amount of cash it offers. 

A personal loan also comes with shorter terms and higher interest rates. On the other hand, a home renovation loan can be included in your current mortgage at lower rates.


Which Loan is Best for a House That Needs Improvements?

The answer will depend on your credit. Here are the five options available: 

Charlotte, NC Home Makeover

1. Fannie Mae Homestyle Loan

The Homestyle Loan is perfect if you have good credit. 

It enables you to structure your mortgage into a 15- or 30-year package. That way, you can include the cost of renovations in your present loan.

2. FHA 203(k)

The FHA 203(k) is good for homeowners that don't have stellar credit. This means if you choose this loan,  you will need to pay some fees upfront.

There are two options available: a full loan or a streamlined loan.

Once you qualify for the FHA 203(k), you'll get a lump sum for major repairs. You can also secure a smaller amount for some minor remodeling projects. 

3. EZ “C”onventional

The EZ “C” loan is available to anyone who wants to renovate their Charlotte, NC home. It includes the cost of value-adding remodeling, which the lender adds to the existing loan.

Whether your appraiser requires the renovations - or you need them yourself - this loan is for you. Its primary requirement, after all, is that the remodeling adds value to your home.

Home Renovations in Charlotte, NC

4. RenoFi Home Equity Loan

If you need a considerable amount for your Charlotte, NC home remodeling, then this loan is what you need. With RenoFi, you may get as much as 90% of your home equity. 

Compared to other loans, the terms are longer. You can pay for your renovations in 20 years. 

Another benefit is that there’s no need to refinance, which is common in most home renovation loans. 

The RenoFi Home Equity loan is also easier to acquire. Unlike a construction loan, it doesn’t require inspections, contractors, etc.

5. Single-Close Construction Loan

This short-term loan is one you can restructure into a long-term loan. As the name suggests, it closes both the construction and permanent financing loans.

The good thing here is that it’s streamlined and easy to do. That’s because there’s only one loan, originator, and closing process. 

That said, the lender will need to inspect your Charlotte, NC property as part of the screening process before you’re approved.


How Much Can I Borrow to Renovate My House?

The amount will depend on the loan with which you’ve qualified. The usual value is 80%. To put it in perspective, you can borrow as much as $100,000 for your $125,000 Charlotte, NC home.

If you need more, know that there are more generous loans. The RenoFi home equity loan, for example, offers as much as 90% of your property’s after-renovation value.


4 Factors to Consider Before Taking a Home Renovation Loan

Renovations will benefit your Charlotte, NC real estate very much. Before you sign up for a loan, though, you should look into these four factors first:

Home Renovation Loan

1. Budget

Your budget is one of the most significant factors you need to consider. It's why you're taking a loan for your Charlotte, NC home in the first place! 

This means you shouldn't try to underestimate the cost of remodeling. You need to look at the big picture because if not, you might end up getting another loan again. 

It's why Nancy Braun always tells her clients to be careful with budgeting. While she can guide you about the related costs, it will help to improve your financial knowledge in general. Consider attending a homebuyer workshop before you apply for a loan.

Charlotte, NC Home Makeover

2. Feasibility Study

If you're thinking of selling your Charlotte, NC home after renovations, it'll need a feasibility study first.

Done by a 203k consultant, this feasibility study is similar to a home inspection. It provides you with an estimate of all the renovations you’d like to do. 

This study will cost you another $300, but you can consider it a good investment. It can help you frame an accurate budget - right before you take out a renovation loan.

3. Timeline

Home renovation loans have an average processing time of 35-45 days. This duration, however, varies according to location. Make sure to ask Nancy Braun first regarding the loan processing period in Charlotte, NC. 

This step is crucial, especially if your project is time-sensitive (e.g., pipe about to burst.) If the loan takes longer than inspected, then you may need to consider another source.

Charlotte, NC Real Estate Agent

4. Licensed Contractor Services

Even if you have handyman friends who can help you, it's best to go for licensed contractors. This is especially true when it comes to electrical works, HVAC, or French drains. 

For one, your lender wants to make sure that their assets - the renovations - are used appropriately. They don't want your Charlotte, NC home to end up depreciating due to poor craftsmanship. 

Even with this clause, some of your handyman friends can still work on smaller projects. That includes painting and other minor upgrades.


Bottom Line

If your property requires a lot of costly renovations, then you should get one. 

Think of the benefits that come with it. For one, it can help you sell your Charlotte, NC home faster. A renovation, although a little costly, will help you gain equity more quickly. 

That said, you need to be ready to shoulder the added costs. It's one of the reasons why you should work on a budget before taking a loan

Remember: you will need to pay an additional $45 to $55 monthly, depending on the loan. That's on top of your mortgage and other expenses. 

If you have more questions/concerns about this loan, please call Nancy Braun at 704-997-3794. Her Showcase Realty team can help with all your loan concerns.


Tags

Charlotte NC Real Estate, Charlotte Real Estate, showcase realty


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