A home renovation loan is a type of personal loan to be specifically used for home improvement for both new and existing houses. Home renovation loans are separate from home improvement loans, which are essentially unsecured personal loans that often come with higher interest rates, and limited loan amounts than home renovation loans.
A home renovation loan is also calculated differently from personal loans, or home equity loans. Home improvement loans are often calculated by the end value of the home after the renovations, instead of its current mortgage value. These are also different from a home improvement loan, which is more akin to a credit card.
This is the stark difference from a personal loan, which is calculated based on the present mortgage value of a home, and a home equity loan, which is based on the difference between the present market value of a home, and the amount due in the homeowner's remaining mortgage balance.
Home renovation loans are great for financing home improvement projects, especially if you have good credit history. It streamlines your financing by merging loans needed for renovations into only one loan, allowing you to borrow money, and make monthly payments on a single account.
Home renovation loans are the only types of loans that are based on the value of your home after home improvements. As such, they were made to be used to finance renovations, which are different from alternative options such as a home equity line of credit, or cash-out refinancing.
There are multiple loan options for renovation loans as well, ranging from a Fannie Mae HomeStyle Loan, to a Maybank Renovation Loan. Most major banks would have their own renovation loan options, which are granted to homeowners with good credit scores. Ultimately, a renovation loan allows homeowners to finance their home improvements without worrying over the upfront costs of the work, making monthly payment transactions instead.
The first thing you should consider is to scout around for the best deals that fit within your budget and credit score. While there are multiple options for renovation loans, not all may suit your requirements and limitations. Do your research, and work with your bank to figure out the best option for you. Here are a few options available in Singapore:
Don't risk losing your home, and piling up the debt! Make sure you secure a loan you can afford. While loans depend on your credit history, and the future value of your home, you will need to find a suitable loan option that you can repay. Be realistic, and compute the loan you can confidently repay within the given time period of the loan term.
It is important that, when you're looking to secure any type of loan, that you work on your credit history. Your credit score will give you the best interest rate that will minimize the interest paid on the loan amount. You will also get better deals and options with a well-maintained credit score.
Since you're looking to secure a renovation loan, you will need to work with a contractor given the renovations. Communicate with your contractor with the budget needed for the project, and the scope of work that needs to be done. This will make it easier to accurately compute your loan amount. Your contractor may be able to suggest loan options as well.
Home renovations vary in scope, and planning out your renovation works with your contractor will make it easier for the agent to give you a satisfactory deal on your loan. You'll get accurate totals and payment plans, as well as interest rate.
Lastly, don't forget to set a reminder to make the payments! Regardless of the type of deal you struck with the loan, you need to make sure you make the payments on time. Not only will late payments affect your credit score, non-payments can prevent you from securing other types of loans in the future, if needed.
Looking for a contractor that will stay with you from start to finish? Our team at Colebuild is ready to help! With an experienced team onboard, you can be sure we'll work with you efficiently and conveniently as we discuss your options for home improvement projects.
Start building your dream home today, and give us a call at Colebuild!