How do you renovate a house using a mortgage plan? Is this even possible?
If you have been wondering these things, wonder no more! We’re here today to tell you that yes, you can get financing to renovate you house with a mortgage. Today’s article is a deep dive to the process and what a lot of people call renovation mortgages.
From its definition to benefits, here is a useful summary that may ease your renovating project.
Let’s go!
What is a renovation mortgage?
Most people call it “renovation mortgage”, but what is it really? This term simply refers to a type of home loan that you use to fund for renovation projects. Details such as the amount, interest rate, and loan terms will vary depending on the lender and program you have applied for.
You may be wondering if you’d be able to get some extra money with your mortgage when purchasing a home. Don’t worry, because the answer is more often possible than not. However, note than every circumstance is special. Factors like your equity, the property value, and your financial health can come into play.
Before you apply for a home renovation mortgage, you need to identify what it is that you need. How much do you need? What kind of terms are you looking for? After that, it will be much easier to estimate the costs for the loan. Not only that, but this is also a great way to narrow down your options and choose the best lender or program for you.
A home renovation loan itself comes in various forms and types. It may include renovating, remodeling, and reparation costs. Some examples include a regular mortgage with additional funds for renovating, a cash-out refinance for improvement projects, a home equity loan, line of credit, a personal loan, or even government loan.
You also don’t have to be living in the home to qualify, as some of these loans can be used to fix up new homes and fixer-uppers. With that said, you will most likely need to own a particular amount of equity in the property before you can get a renovation loan.
Can you renovate a house using a mortgage plan?
The short answer is yes, you can renovate a house using a mortgage plan. The most common form of renovation mortgage is including the funds to the total loan balance. However, note that interest will start to accrue from the moment you receive the renovation funds. This is why it’s crucial to be ready with your equipment and process, so that you can begin the work as soon as possible.
Benefits of renovation mortgage
A lot of mortgage plans for renovating a house are quite easy to set up and apply for. This is especially true for small and minor improvement work. But if you are looking to undertake a larger, more expensive project, a renovation loan will prove to be even more beneficial.
This is a fantastic option compared to credit lines, as it will discourage misuse of funds. Plus, you may be able to access a larger sum of money if you have a higher equity. Not to mention lower interest rates and monthly payments, depending on your specific terms.
Do you need a mortgage broker?
Now comes the important question: do you need a mortgage broker to get a good loan for renovation? There really is no one answer for this, as it depends on your personal experience in mortgage applications and financial situation.
But in most cases, it might be beneficial to use the service of a broker. This is because renovation mortgages are less common than regular mortgages, which means they might be harder to find and qualify for. Comparing costs and rates from different lenders may also be a tedious task.
One of our best tips is to find a broker with expertise in renovation mortgages. They will have specialized knowledge and relationships with lenders who are known to lend such loans. Moreover, they will be able to provide good advice and tips, thanks to their experience!
Other ways to finance your home renovation
What are some other ways you can renovate a house using a mortgage plan? Other than renovation loans, some other financing alternatives are as follows:
- Unsecured personal loan
- Use your personal savings
- Secured home equity line
Loan from friends or family members
Conclusion
It’s always a good idea to apply for a mortgage to renovate your house when the interest rates are low. Keep an eye on current rate and don’t be afraid to submit applications and enquiries when you need it. Make sure to check factors like your credit score and other financial conditions, so that your chances of getting accepted are higher.
