Getting ready to sell? Looking to save money on energy bills? Home renovations can be one of the best things you’ll do to improve your home’s livability, increase value, and more. Most of the time, you’ll see a return on the money you spend as home improvements decrease utility bills or as greater home appeal means your property sells at a higher rate. Here’s some information to get you started.
Sourcing the right home improvement loan
While homeowners may turn to credit cards or microloans for small projects, $100,000 or more can be available for the right borrower. But consumers should take care to get the right funding for their needs. The best loans make financial sense for the borrower. Not all home improvement loans are alike.
If you have a financial professional that you work with, talk to them first for lender recommendations. You can also ask friends for references for who they may have worked with in the past or use also online search engines. Some search engines are specifically tailored to help identify improvement loans and can get you approved within a day.
Types of loans for home improvement projects
While it is possible to get approved within a day, try not to rush the process. Be sure to identify multiple sources of loans you feel will work for you and compare their services and benefits. Options that may be available include personal loans with shorter-term payback periods and home equity loans that may have higher interest rates and provide money in larger amounts tied to the value of your home. Some homeowners can also access energy efficiency loans and Title I loans from the U.S. government, loans for seniors, and loans for homeowners in rural areas. The terms for any of these loans are tied to a number of factors including your credit score and borrowing history.
There are a few things to consider when looking at any kind of loan. For starters, be sure to understand what APR and interest you’ll be expected to pay. Also, look out for fees. In personal loans, these can include the application fee, late fees, and early payment penalty fees. With home equity loans these can include origination fees, notary fees, appraisal fees, points, and closing costs.
What to look for in a lender
Lenders can make a big difference in your experience with the home improvement loan process. They can also affect how much you’re able to borrow and the terms for paying it back. Be sure to understand the rates and terms each will offer — they may vary from organization to organization.
Look for a lender that you’re comfortable with, that is willing to answer all of your questions, and that speaks to you in clear terms you understand. When selecting lenders, you’ll want to look at whether they typically make loans to borrowers with your qualifications. These are known as a lender’s eligibility requirements. Also, look for lenders with strong customer service scores that won’t require you to take a larger loan than what you need or who won’t lend all of the money you’re looking for.
Applying for a loan
When you’re considering a home improvement project, start early and develop a budget for what you want to accomplish. Once you know how much you’ll need to borrow, determine your preferred loan types and terms and then get prequalified. This will help you to shop for lenders so you can apply to the best lender for you and the turn around will be reasonably fast.
Improvements with the best ROI
As you might expect, some home improvement projects have a higher return on investment than others. While the exact return numbers can vary by region, in the U.S. nationally bathroom remodels or additions can recoup around 60 percent of costs. Homeowners can recoup around 70 percent from a new outdoor deck or a deck remodeling project. Another strong investment is a new garage door. This is one improvement which nearly pays for itself.
In addition to being a smart financial move, all of these could be a strong incentive for a potential buyer to choose your home over another property in a crowded marketplace. A full overview of showing how much money homeowners can recover from remodeling costs when they sell is available online at Remodeling Magazine’s 2019 Cost vs. Value Report.
Other ways to see an ROI
In addition to resale values, some homeowners see a return on investment from savings in utility bills based on home updates. For example, updating insulation in your attic or crawlspace will seal cracks and keep warmed or cool air right where you want it. As a result, you’ll save money and be more comfortable. The same goes for replacing doors and windows with more energy efficient versions or improving the seals around them. Replacing appliances or lighting are small remodeling projects that can also cut electricity use and lower bills.
Each home is unique and will have different ways to save energy. An energy audit can help you find opportunities and understand the ROI you’ll see from a potential project. Your auditor can also compare the amount of money you’ll save in your bill with the cost of an appliance or project. Often these projects pay for themselves over time.
Make your home beautiful
Once you’ve determined your project, preferred lender, and type of loan, you’re ready to make your home more beautiful. Have fun working your remodeling magic. The results will be living spaces that are more comfortable, more efficient, or more relaxing for you, your family, and your friends to enjoy.