Taking out a loan is a big decision that requires serious thought and deliberation. While a loan can provide opportunities for an individual to achieve their goals faster, a loan also carries the financial risk that the individual should be prepared and ready to take on.
There are many different types of loans available, with each loan tailored to a certain type of personal goal. Renovation loans allow homeowners to devote funds toward home improvement goals, which can potentially increase home value. The risks and rewards of a renovation loan should always be considered before making a final decision.
Considering a renovation loan? Before signing on the dotted line, be sure to think about these key details to determine whether or not a renovation loan is the best choice for the project at hand.
Deciding on a Renovation Loan
Many homeowners consider taking out a renovation loan to tackle large-ticket upgrades in their home, using the borrowed funds to winterize windows or install a new HVAC system. This type of loan is particularly helpful for homeowners who are suddenly confronted with an expensive repair that can’t be delayed.
But in some cases, a renovation loan can be included within a mortgage before the sale of a house is even finalized. This is a great option for potential buyers who are attracted to a fixer-upper that needs significant repair before becoming move-in ready.
In either case, be sure to answer these questions before taking out a renovation loan.
Do You Have Time to Tackle Big Projects?
While renovation loans can boost funding, time constraints can still be a challenge. It’s up to homeowners to find the time to get projects off the ground and finished without delay. Hiring a contractor to speed things up will likely ramp up the total cost of renovations, so homeowners should be prepared to adjust the budget accordingly if they don’t think they’ll have enough time to devote to finishing the renovations themselves.
Is the Budget on Par with Estimated Costs?
Especially when wrapped into a mortgage, renovation loans can sometimes make homebuyers feel like they’re saving tons of money on their new home. However, it’s easy to underestimate the cost of big repairs — especially when blinded by the excitement of closing on a new home. When taking out a renovation loan, homeowners need to be scathingly honest with cost assessments for the renovations planned. The last thing homeowners need is to be trapped into paying back a loan while also being stuck with a half-finished construction project.
Has the Project Been Years in the Making?
If you’ve caught yourself scrolling through different farmhouse molding ideas more than a few times and even have a gallery of saved images, then an interior decor renovation may have been in the works for a long time. If a particular project keeps coming to mind, then it probably carries a significant personal value that can boost the enjoyment of the home. On the other hand, if you’re suddenly picking out color swatches on a whim, it may be beneficial to give potential home improvement projects some more time to stew before taking out a financial loan.
Does the Renovation Project Carry Long-Lasting Value?
Some renovation projects can actually carry long-lasting value for homeowners, which can merit the use of a renovation loan. Unlike stylistic remodeling that only addresses aesthetic preferences, more substantial upgrades can be considered an investment in the home and even raise home value.
For example, installing engineered hardwood rather than basic flooring can give an incredible boost to home value, as it improves durability and quality that is likely to last much longer. Using a renovation loan to invest in the home’s overall value may be beneficial for those planning to list their home for sale down the line.
Careful thought should always go into the decision of taking out a renovation loan. With serious planning and an honest look at budgetary concerns, a renovation loan may be a good option for homeowners looking to make significant upgrades to their property.
Authored by: Matt Lee
- Matt Lee is the owner of the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.
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