Top Home Renovation Loans for 2019
Today, lenders offer different types of home renovation loans. It could be for making small changes to the rooms or taking out a loan for adding a room, over-the-top kitchen makeovers and adding a swimming pool in the backyard. Lenders have custom home-improvement loan products for customers or borrowers. When homeowners do not have the required funds, they turn to financing from online lenders and Fintech firms.
The lenders finance home décor and improvement projects such as buying new furniture, applying a new coat of paint on the walls, renovating the front lawn and landscape, and repairing damp walls.
According to an article published on https://www.huffpost.com, lenders offer 203k home renovation loans too. It is not necessary to opt for such a loan program, but the choice is open for homeowners or borrowers. According to online lenders and Fintech firms, a loan for home renovation is not as expensive as most people think.
The lending firms recommend that customers take a loan for home renovation depending on their living needs and the rate of interest they can manage to pay on a monthly basis. The interest rates on home renovation loans could be as low as 2.50 percent or as exorbitant as 36 percent, according to lenders. The average rates of interest border around 10.3 percent to 32 percent. The rate depends on the type of loan a borrower takes out from the lender. Here are some of the top home renovation loans for 2019:
Home Equity Line of Credit
When it comes to Home Equity Line of Credit (HELOC), is almost like a home equity loan. The customer receives a revolving credit line instead of lump-sum money from the lender. The amount borrowed could be used for home improvement and renovation when a homeowner needs the same. The lender or bank will charge only the interest on the sum a customer has borrowed, and not the whole credit line. As far as a HELOC is concerned, it almost functions like a revolving credit.
There are some pros and cons of HELOC. These include the ability to convert home equity into liquid cash, reduced rate of interest compared to personal loans, and using the cash to repay debts and make home improvements.
As far as the pitfalls are concerned, they are high-interest rate compared to mortgage, minimizes the equity stake in a property, requirement to have a very high credit score of more than 680, the property may go for foreclosure if loan not repaid, and the conversion of unsecured debt into secured debt with the home used for consolidated debt.
Cash-out refinance
As far as a cash-out refinance loan is concerned, it lets the borrower make the most out of the equity in his or her property. A home equity loan that is a second mortgage, cash-out refinance is a new one and the borrower will have to deal with a single lender and one loan to repay. Today, lenders online offer cash-out refinance for renovating homes and offer liquid cash for equity up to a limit of 80 percent of the market value of the house. There are lending companies like Libertylending.com, customers can visit to learn more about home renovation loans of 2019 and make an informed decision.
The greatest benefit of cash-out refinance is its low rate of interest and the amount is paid off at the same time as the standard mortgage payment. Customers having a VA or an FHA loan can avail refinance programs as well.
The term of this type of home renovation loan is favorable with these kinds of mortgage refinancing compared to home equity loans. That is due to the long repayment period. Generally, cash-out refinance loans have a loan term of 15-30 years and customers can opt for a fixed or modifiable rate mortgage.
There are certain pros and cons of cash-out refinance loans. These include a low interest rate compared to home equity loans. The borrowers will use the cash to repair their home or pay off debts, interest is tax-deductible, low mortgage rates, one mortgage payment, and low credit requirement compared to HELOC.
The drawbacks of cash-out refinance are very high closing costs, home foreclosure if payment is not made, and reduced amount of equity in the property.
203k FHA Home Improvement Loans
According to lenders, a 203k loan is meant for buying a property and make necessary repairs. The lenders recommend this type of loan for people who are looking for either of these two. In such a case, customers should opt for nothing but 203k FHA home renovation loans. The amount borrowed could be used to invest in a home that requires repairs and maintenance. The additional funds are for making the essential repairs and renovations.
The lender or Fintech will offer up to an amount of $35,000 liquid money for renovation and repairs. It is a type of loan for certain extensive projects such as properties requiring change in foundation, repair, and plumbing.
The qualifying factors are similar to FHA loans because the customer will need a high credit score. The lenders provide this type of loan that crosses 100 percent loan-to-value in certain situations. A borrower will need a credit rating of 640 to avail FHA 203k loans for home improvements. These little things matter, at least a good credit history and a credit score for easy loan approval.
Credit Cards
Lenders also offer credit card loans for home renovation in 2019. Then, customers should have the financial ability to repay the amount borrowed within a short time, such as close to 18 months. Today, many lenders are encouraging borrowers to take credit card debts for home improvement projects. The lenders and Fintechs are targeting customers who have the capacity to repay within a short period.
Conclusion
No matter what home renovation loans lenders provide, all of them need a good credit score for qualifying. A poor credit rating will not help much because the loan application would face rejection. Therefore, lenders recommend borrowers to improve their credit score first and then apply for home improvement loans for fast approval.
