How to Finance Renovation?
We need to take out a loan to finance our home renovation. We don’t have enough equity in our home for a HELOC. We need about $25,000-50,000. Where can we go and what kind of rates should we expect? Thanks.
We need to take out a loan to finance our home renovation. We don’t have enough equity in our home for a HELOC. We need about $25,000-50,000. Where can we go and what kind of rates should we expect?
Thanks.
If it’s to retrofit your house to make it more energy efficient you might want to take the risk and wait a bit? New York may be the next one to establish the PACE Loan program whereby the municipality will front the cost of making a homeowner’s home more energy efficient (i.e. insulation, replacing windows, upgrading heating systems; water efficiency upgrades). The homeowner would pay this loan back via a special tax assessment on their property. The idea here is that there will be net savings for the borrower on what they would save on their energy bill. The City of Berkeley in California was the first city to pioneer this program.
http://tinyurl.com/ycvom76
The only problem I see is that Fannie and Freddie seem to not agree with this program as this lien will be in front of the homeowner’s mortgage since it’s considered a tax. And it’s expected that there will be very strict conditions on what renovations/installations would qualify under this program. Nonetheless good to know…
Eltrin, you didn’t mention what downpayment % you are putting on the house. If its 20%, and the extra 50k (if indeed that’s enough) gets you to 17% then maybe not a huge deal, hunt for personal loans and credit cards (you will get cc offers after you close). if it gets you to 5%….
eltrain- Just google it but most if not all the major banks offer them. I checked a couple weeks back but I would compare apples to apples.
I’d check
TD Bank
Citibank
Chase
Bank of America
etc..
eltrain, I would certainly classify those things as needs rather than wants (i.e., new cabinets in the kitchen) so sounds like you have done the homework. Best of luck with the reno!!
Thanks everyone. As always, I probably should have provided more information. We need to do the renovations before we move in. The house is not uninhabitable, but there are certain safety issues we want to address (electric, structural, crumbling plaster, egress). It is a two-family house so some of the renovations will improve the income on the rental. We have retirement savings that unfortunately we can not borrow against, BUT that we can cash out in a worst-case scenario if we can’t pay off the personal loan. It makes me nervous to take on so much debt, but I just ran the numbers on $25,000 at 10% and we can handle the payments even if we pay it back in 5 years. I think in the long term, we’ll be glad we did as much reno upfront as we could. Adam, if you don’t do personal loans, who should I go to?
Thanks.
DISCLAIMER- I don’t offer personal loans, just offering free advice. It’s a means to an end. I have heard of people playing the zero percent credit card game and taking out a HELOC after the work is done since they made improvements. I know nothing of your property and what work you are looking to do and if it makes sense.
eltrain, is the house uninhabitable as it is? What I am asking is whether the home renovation is really a need or a want?
While I don’t usually agree with BHO, he makes a good point – if you don’t have enough equity in your house to qualify for an HELOC, borrowing additional funds is not the answer unless you’ll get more than dollar-for-dollar value by completing the renovation.
In today’s low interest rate environment, there is a reason Adam is quoting you an option at 10% interest.
I would save for the next year or two until you can afford to pay cash for the reno. Sounds like you’re getting in over your head if you don’t have equity in the house and don’t have an extra $25k-50k savings. What if the reno goes overbudget, you’re in the middle of a construction zone and you can’t get another personal loan?
You’ll effectively put yourself underwater, even deeper if you’re taking on water already. Why do this? If you can’t save $25k to $50k, how are you going to be ready when it rains lions and hyenas?
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