Home lending to finance that addition
Is your home bursting at the seams? Does your growing family need more living space? What about a hobby room, a workshop or space for a home-based business? You might want to renovate to save on energy bills or to increase the resale value of your home. But renovations are costly. Home lending options for remodeling and renovation can be the solution. There are other ways to finance a renovation, but home lending options are often the most economical way to go. First Utah Bank has some practical advice for you.
All successful home renovations begin with a solid plan. Start by determining your goals before you pursue home lending. What are you trying to achieve? If it’s reduced energy bills, your renovations could include new windows and doors, insulation, a new furnace or a heating/ventilation/air-conditioning (HVAC) system. You might want to add another bedroom for a teenager, or perhaps an in-law apartment for a parent.
Carefully work out all of the materials and the labor you’ll need. Don’t forget to check whether you’ll need any building permits from your city or state.
Talk to several contractors to get reliable estimates of the cost and the time required for your renovation. Depending on what you’re planning, you might also need to consult an architect.
Once you have a solid estimate of the costs required, talk to a home lending specialist at First Utah Bank. We’ll help you understand your financing options, advise you on how much money you’re eligible to borrow and even pre-approve your loan.
Financing options
Depending on the renovation and your situation, you could have several options for financing in addition to home lending. If your project is small and you can do the work yourself, you might be able to fund it from your own savings.
For moderately sized renovations, a credit card can pay for some of the materials. Be careful not to carry the balance too long. Credit card interest rates often are over 18%. If you take several months or years to pay off the materials, they could end up costing you twice the original price.
Some building-supply and home-improvement stores offer financing plans for larger projects. Read over the details of these plans carefully. If you miss a payment or are late for any reason, there can be expensive financial penalties.
How to pay for large home projects
Larger renovations, such as a room addition or a bathroom or kitchen update, can easily cost thousands or tens of thousands of dollars. Two more options for financing these projects are:
- A personal loan. You pay back the principal and interest with monthly payments over one to five years. The interest rate can be fixed or variable and is usually less than that of a credit card.
- A personal line of credit. An open credit account you can access anytime you need to pay for renovations. A line of credit has a lower interest rate than a credit card and charges interest only on the outstanding balance each month. As you pay off the balance, you can access the remaining funds up to your limit.
First Utah home lending for renovations
Refinancing an existing mortgage allows you to spread out the repayment of the renovation over a long period, and the interest rate is the same as that of your mortgage—lower than a personal loan or line of credit. At the same time, there might be initial costs for setting up the loan, including legal and appraisal fees. But the monthly payments can be much easier on your budget.
The upside is that renovations can add to the value of your home, potentially leaving you with more equity.
Come to First Utah Bank to talk to a specialist in home lending in Holladay Utah about your renovation or remodeling ideas. We’ll help you find the financing option that’s best for your plans and your financial situation.