There are many options to help finance improvements or repairs in a home that you already own, or a home that you plan to purchase. Ultimately, the best one is what works for you. The answer is different for everyone. We will take you through a few options below and then will link to specific pages where we will go into greater detail on each loan option.
Home Equity Loan
This option is essentially a second mortgage that you would take out on your home for the needed repairs or remodel. There is a cap on the total loan to value. This would be a loan where you borrow the entire amount and your interest rate is fixed. This option is great if you plan to take a while to pay back the loan. Click to read more about home equity loans.
Home Equity Line of Credit
This option is also a second mortgage on your home. There is also a cap on the total loan to value which may vary by lender. In this case, you are approved for the total loan amount but you only draw what you need. This means that you only pay interest on the money you draw as well. One important thing to understand is this rate as the ability to adjust monthly… up or down. I personally have a home equity line of credit. I dip into it on occasion and then pay it back. It really is a great option if you have equity in your home. Click to read more about a home equity line of credit.
FHA 203k Rehab Loans
The government backed FHA 203k Rehab loan may be the best option that works best before you buy the home. In this scenario, you are going to purchase a home and you can see the repairs that will need to be made. You are able to borrow what you need to purchase the home plus the money to make the repairs or remodel. The down payment is very low and the rates are great. There are a few stipulations that you need to be familiar with, so we recommend that you click to read more about FHA 203k rehab loans.
Borrow From a Relative
This is another great option if available to you. You can come up with a fair interest rate and mortgage payment and amortization schedules are available free online. The best part is this loan may never show up on your credit report.
Seller Credit at Closing
There are times when you can negotiate a large seller credit at closing to help pay for repairs. In this case, you would buy the home at full value (maybe original asking price) and everything including your mortgage is based off of that. However, at closing the seller would rebate back the negotiated amount that you can then use for repairs.
Hopefully one of these options will work for you. Contact us to review your specific scenario.