Expanding your home to add value and square footage can be costly, so it’s important to know how to finance a home addition. Just like with buying a home, there are many loan options available to homeowners to fund their projects.
Here is a quick guide to the most common options for financing an addition to your home:
A home equity line of credit allows you to utilize the equity you’ve already built in your home. Equity is equal to the value of your home minus the amount you still owe on your mortgage.
A home equity line of credit typically has a draw period in which you can tap into funds while only paying interest payments. After the draw period ends, you enter a repayment period and start paying back the principal amount.
Title I loans offered by the Department of Housing and Urban Development are available to help fund renovation projects. Requirements for qualifying vary from one state to another, but are meant to fund improvements to basic utility and livability of your home.
Therefore, if your remodeling project is purely aesthetic, you may want to consider a different type of financing.
A personal loan isn’t tied to the value of your home, but dependent on your individual financial situation. Credit history and debt to income ratio are the main factors lenders will consider when approving you for a personal loan.
This type of home improvement loan offers flexibility for those who don’t want to use their house as collateral. They can also be a good option for homeowners who haven’t had time to build equity in their property yet.
These are only a few options for financing your home remodeling project. Some other possibilities include home equity loans, cash out refinance programs and low-interest rate credit cards for smaller projects. As long as you compare your options carefully, you’ll find the best way to fund your remodeling goals.
Robcon Realty is a family-run real estate company located in Vista, CA. Bob Peterson has been a broker for nearly 40 years, and founded Robcon Realty with his wife, Connie Peterson. Their daughter, Robin Hawkins, followed in their footsteps and has been practicing real estate for over 18 years. Over the past few years, four of Bob and Connie’s grandchildren have become real estate agents themselves to continue the proven track record of excellence and joy our family business has provided in finding the perfect home for you.