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How to Secure a Loan Advance for Home Improvement Projects

Most likely, your home is your greatest asset and can provide you with more and more equity as the years go by. But there are definitely times when your home needs a little TLC or maybe you’ve even found a place that you’d love to renovate. So how do you get the money to do this?

Home improvements can range from a few thousand to well in the six figures. If looking for a loan advance, exploring all your options is crucial to finding the best outcome for your wallet and peace of mind.

Some Things to Remember

Before we got through the options you need to keep in mind that obtaining a cash advance or loan advance is heavily dependent on your credit rating, just like with any other type of loan. It’s recommended that your house payment and other debt should be below 36% of your gross monthly income.

You should also make sure you don’t have maxed out credit cards or a history of late payments. In many cases, lenders will want specifics about your project.

If using a licensed contractor for the work, you’ll want them to provide a firm bid – one that accounts for materials, labor and, wisely, factors in an additional 10% for padding. This Old House even recommends to tack on an additional 20-30% just to be safe, especially if you’re going the DIY route.

It’s also highly recommended you use a trusted real estate agent when searching for your ideal reno-home. Closing on these properties will essentially work the same way and your agent will be able to walk you through the process. Their compensation and real estate commission advances will also work the same way.

Home Equity Lines of Credit

HELOC‘s allow you to open a line of credit against your home’s value, up to 80%.

They have a “draw period,” typically 10 years, over which you can take the money as you need it.There is no lump sum and you’re only charged interested on the money you draw. Repayment periods are usually around 15 years.

Home Equity Loans

These are lump sum you receive once, borrowed against the value of your home. This does not refinance the original loan, though.

Repayment periods are normally 15 years and they usually carry no closing costs. Rates with these loans do tend to be slightly higher. You can find more information on different Home Equity lenders here.

FHA 203(k)

203k’s are federally sanctioned program to assist in the rehab and renovation of a home. This takes your existing mortgage, or a new one, and creates a second mortgage with the improvement costs rolled in. This saves borrowers time and money and covers a myriad of home improvements.

The loan amount is based on the future value of the house after renovations and, thus, the equity and amount you can borrow may be higher.

Title 1 Property Loans

If you’re in the market for smaller improvements needed for your home. They can be used in conjunction with a 203(k) and you must have occupied the property for at least 90 days. Any amount over $7,500 must be secured with a mortgage or deed of the property.

Personal Loan Advance

These are the quickest way to get a cash advance. it’s essentially an unsecured loan and varies by lender. Every lender’s terms will be different and your credit score will weigh heavily on the percentage points of your loan rate.

The upside is that you control how the money is used and the funding can hit your bank account as quickly as the same day you apply. With this loan, however, you cannot claim tax deductions like with mortgage interest.

Nerd Wallet and Student Loan Hero have two great lists laying out the pro’s and con’s of popular lenders.

Do Your Research

We cannot drive this point home enough. The more informed you are as a borrower, the more your you will find the best loan advance for your project.

Connect with us to help your find that perfect home for your dream renovations.

 

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About the Author

Kaya Wittenburg

Blog Author and CEO

Kaya Wittenburg is the Founder and CEO of Sky Five Properties. Since the age of 10, real estate has been deeply ingrained into his thoughts. With world-class negotiation and deal-making skills, he brings a highly impactful presence into every transaction that he touches.

He is here to help you use real estate as a vehicle to develop your own personal empire and feel deeply satisfied along the way. If you have an interest in buying, selling or renting property in South Florida, contact Kaya today.

   
Feel free to call me at: (305) 357-0635
or contact via email: info@skyfiveproperties.com